EIULs and Missed Fortune

honestagent · 02-01-2007, 07:51 AM

Greetings all. I'm new here. Just wondering if any of you are familiar with Doug Andrews' book 'Missed Fortune' and / or the concept and if any of you are or know anyone who is funding EIULs using his strategy?

Any info. you can provide is greatly appreciated in advance. I've heard mixed reviews on this and am hesitant to pursue. Thanks again.

marcircus · 02-04-2007, 03:35 PM

Check this link out. Hard to read, but if you have two or three hours, you can read it all. It gets tiring and repetitious, but well worth reading it all if you are thinking about it.

http://www.mightybargainhunter.com/2...rrible-advice/

Lets see if this link works: http://socialize.morningstar.com/New...&convId=183551

Lastly http://www.insurance-forums.net/view...=asc&start =0

The only things I have learned for sure is: If someone is going to do this, get the LI before going into debt, you should sure as heck better be sure you are eligible for LI at a decent rate and get it locked in. Also, the higher the tax braket you are in the better the theoretical chances of success.

James · 02-05-2007, 10:01 AM

Well according to Morningstar board the word free is okay but the word "FREE" is a legal trademark. Just sure am glad I never use the word "FREE" or I might be in a bit of a tight spot!

Now I do suggest the books of "Infinite Banking" or IBC and Missed Fortune a good read, even if you disagree with the ideas. Yet though I really like the idea of those 8 grand seminars Andrew is now giving! I mean that is where the money is at! I should get into that line, yea 8 grand and you can hear me talk all weekend, well maybe I should ask more, I mean I'm a lot more interesting than this guy Andrew! Hell I'll even throw in a history lesson or two.

honestagent · 02-06-2007, 12:23 AM

Thank you for posting this information. I greatly appreciate the feedback! Sharing the wealth of knowledge is always a good good thing! Thank you again.

marcircus · 02-06-2007, 08:49 PM

Also check this link out from the Federal Reserve. It was posted in this forum previously but some of the information was redacted. using the posted information, I found this paper.

Interesting reading. http://www.chicagofed.org/publicatio.../wp2006_05.pdf

As to whether this is a good idea or not.

The bottom line is that I am not financially savy enough to answer. However, my uneducated opinion:

In undertaking any endeavor, one has to measure the benefits against the risks. The ultimate risk is the insurance contract goes to a zero DB. Well then, one owes a huge tax bill. Read all of Airborne1's posts (there are not that many) he claims to know an insurance company that will let you keep a minimum of $1,000 DB. Also claims to know of an insurance company that will give you interest free loans.

What happens when one gets old and feeble. Who will manage this undertaking?

Let's say a person "borrows" some money when he is 60. At 6% interest, yearly, for 15 years (in 15 years, they have paid 90% interest 6% x 15 yrs), wouldn't they be better off just paying taxes?

The advantages just elude me (though I think I understand the premise). I think one is counting on an ever increasing stock market. It does not always go up, we have lived through an incredibly auspicious and uncharacteristic time for the stock market. People forget how long the market can be in the doldrums.

On the other hand, Stibroker, a moderator here, has a $5 million UL. He is certainly not uninitiated when it comes to these things.

Lastly, do a few google and dogpile searches. Suggested terms:

- Problems life insurance cash value loans
- lawsuits missed fortune 101

This is about my full extent of knowledge on this topic. My own skepticism is that no one will find a cheap and easy loopehole to circumvent IRS regulations, and if they chance upon one, it will soom be closed. Also, if it sounds too good to be true, it probably is.

But, is there some reason why it has to be all or nothing? How about hedging your bets with a hefty CV LI policy but make other investments too. One cornerstone of investing is diversification.

*I tried answering your e-mail. I have no idea if I was successful or not. I gave up.

Good luck.

honestagent · 02-06-2007, 11:57 PM

Are you kidding me?!?!? You have provided a substantiative amount of info., much more than I can chew even view presently; I am so grateful to you for taking the time to share what you know, your opinion, and all of what you have learned. I am sincerely most appreciative of this. Thank you very much. Should I find anything 'out there' good, bad, or indifferent, I'll post some links too!

Thank thank thank you!

marcircus · 02-07-2007, 09:01 PM

I find the e-mail feature difficult to negotiate.

Quote:

1. could you advise a few ways of how to ascertain if this is indeed credible? 2. Okay will the product deliver as long as it's funded correctly? 3. Which companies? (honestly speaking, I thought company didn't matter but apparently so???)

4. What is your personal stance on this concept, if you don't mind me asking? I know opinions are just that... and I don't have one at all until I can see some solid evidence, you know what I mean?

1.A. There is a huge difference between theory and practice. Anyone can buy a book on how to pick stock. Doing it is another matter.
1.B. Before actually buying an LI policy, ask the agent for a specimen of the contract. Read it. The policy will seem so different than the prospectus. There are even firms out there you can hire to evaluate the policy.
1.C. Would you, evaluating yourself, think you have a certain amount of financial acumen? Don't answer except to yourself and honestly.
1.D. How many LI agents are jumping on the bandwagon to do this? Who would know better than they about the viability of this endeavor.
1.E. How to ascertain credibility. Learn all you can about LI and the related taxation. Study the power of interest compounding (from both the perspective of a debtor and creditor).

2. "Deliver." Deliver what? Tax free loans? What product? An interest bearing UL, an equity indexed UL? A VUL? I suppose, if everything goes right. The question is what are the odds of everything going right. The stock market keeps going up, the management of the insurance company acts prudently and adroitely administers the company.

I think you should also worry about your capacity to pay the loans or service the debt if any. How about your abilities to account for all transactions, service any debt, administer a multitude of loans, forecast future earnings in the policy and withdrawals, correctly predict premiums, forecast net cash value.

3. I don't know.

4.A. There is no free lunch. Risk and reward are inextricabley intertwined. I personally would not mortgage my home to the fullest extent possible and turn around and put into life insurance or any single investment vehicle.
4.B. I would not approach it from a viewpoint of acquiring a mortgage in exchange for LI. I would view it and study the matter more in light of the benefits of debt to control assets, leverage if you will. If you view it as trying to control assets, you will not be putting blinders on, you will consider other alternatives.
4.C. I would [b]never[b] enter into any strategy that required me to "put all my eggs in a single basket." One should always be diversified.
4.D. My only interest in this topic is trying to learn the full benefits of LI. There are far more benefits and attributes than people realize.
4.E. I would not view this as an all or nothing proposition. If someone needed LI anyway to provide for the family or loved one, then by all means explore this topic further. As long as one is buying the product, might as well buy the most flexible one with the most attributes.
4.F. Personally, I would never get a mortgage to do this. But that is me. Chances are our financial and familly circumstances are very different. I would only consider partial implementation. I.E., I get a nice pay raise. I now have to decide: do I want to send an extra $250 in for the mortgage as I had planned or should I buy an LI contract. That is the extent I personally would "implement" the plan.
4.G. I personally am weary of any system anyone touts as the ultimate product anyone needs.
4.H. Lastly, ask yourself why every LI agent in the country is not doing this.

Addenda.

- Study stock market history. Bull and bear market returns, losses, duration of bull and bear markets, and real returns (after inflation earnings).

- Do you know what an LI "illustration" is? Your LI agent will ask you what you think the market will return (at least if you buy a VUL) and will give you a year by year estimate of the performance of the CV in your policy until you are age 100. Pick a lower more realistic return. Maybe 6%. Don't tell him you expect the market to return 10%.

- Some UL's go to age 100. Some, I bleieve Prudential to age 120. That would be another difference between companies.

- Study all the riders available from different companies. Definitely get dissability. If you are dissabled, the insurance company will pay the premiums for you.

- Study personal finance and investing. The Morningstar discussion boards are excellent. The Vanguard boards have had a lot of discussions on investing versus paying off the mortgage.

Good luck

James · 02-07-2007, 09:39 PM

Equity management is a wonderful plan to increase one's wealth. Yet I do believe in moderation, obviously Andrew of "Missed Fortune" does not! The idea is basically sound if you use minimum return, such as the EIUL that guarantees 4%, figure it out on that margin and if it works with that than you are good to go. If your mortgage interest rate is less than 6% great it should work. If one is paying more than 6% in todays enviroment I wouldn't suggest such a plan, they're just not very smart or a bad credit risk.

honestagent · 02-08-2007, 12:22 AM

I am so grateful to you kind folks for your honest feedback. You are all so wonderful and I feel so blessed to have found this forum.

A very special thank you to marcircus.

And for James too!

I will take these suggestions and proceed with caution. Whatever I find, I will happily share once my MA season slows for me.

Thanks again!

marcircus · 02-08-2007, 09:58 PM

James,

I would really appreciate an answer. I must be missing something, but obviously don't know what.

Let's say a person is 60. They "borrow" money from their UL.

1. When the person is 75, won't he have paid 15 years of interest on his loan?

2. If he is paying even 5% interest on the loan, that amounts to 15 years at 5% or 75% (15 years x 5%). Am I right or wrong? If I am right, wouldn't that person be better off just paying income taxes?

Thanks so much.

***Melmunch3*** · 02-09-2007, 10:47 AM

When you take out a policy loan, they charge a stated percentage, but at the same time, they credit a stated percentage to your policy fund, even on the money that you borrowed. Therefore, if they charge 5% on the loan, but they are crediting you at 5% also, then the loan is a wash, and your cash value does not suffer.

Some policies offer a wash loan right away, but in many cases, it is only available after a certain period, say 10 years.

James · 02-09-2007, 05:12 PM

Quote:

Originally Posted by marcircus

James,

I would really appreciate an answer. I must be missing something, but obviously don't know what.

Let's say a person is 60. They "borrow" money from their UL.

1. When the person is 75, won't he have paid 15 years of interest on his loan?

2. If he is paying even 5% interest on the loan, that amounts to 15 years at 5% or 75% (15 years x 5%). Am I right or wrong? If I am right, wouldn't that person be better off just paying income taxes?

Thanks so much.

The idea is to build a Cash Value equaling or greater than the amount borrowed during the same time period. This is obviously easier done if you use tax free investments of one degree or another. Most loans are simple interest bearing, most investment is on compounding interest bearing making the savings investment more powerful than the loan accumulation.

15 year mortgage is a suckers bet as I mention before. Take out a 30 year loan and with the difference of the 15 to the 30 year payment you invest that up to 2% less in interest, even at 2% less in the same 15 year period you'll have about the same amount borrowed or cash instead of equity, which to you think speaks louder? Equity or Cash?

Steve · 02-09-2007, 05:34 PM

Most people don't have the discipline to correctly pull it off over time...

James · 02-09-2007, 05:46 PM

Quote:

Originally Posted by Steve

Most people don't have the discipline to correctly pull it off over time...

I really don't know what that has to do with anything? Most people lose their homes because they can't make payments over some time period? I know what you are saying but if I take that mindset I wouldn't sell insurance, most people will not continue to make premiums, most plans lapse because of that specific reason so no one should sell insurance is your conclusion?

Steve · 02-09-2007, 06:02 PM

Sorry, that's not at all what I mean. I see a big difference in people's thoughts on investing for short term or long, and buying a product -- like insurance. (Far too many people in this country do not have the discipline to do any of these correctly. I'm not speaking of them right now!)

I just think that when people alter something like their mortgage term, too many of them are going to stop "investing the difference" at some point, or at some time during that fifteen years and mess up the practicality of the idea.

Some of these scenario's are great on paper, but follow through for most is lost at some point.

I would rather say, go for the fifteen year mortgage, manage your budget better, AND through proper budget management, come up with that same (in your scenario) amount of money and invest it. Everyone is better off then!

James · 02-09-2007, 07:00 PM

Quote:

Originally Posted by Steve

Sorry, that's not at all what I mean. I see a big difference in people's thoughts on investing for short term or long, and buying a product -- like insurance. (Far too many people in this country do not have the discipline to do any of these correctly. I'm not speaking of them right now!)

I just think that when people alter something like their mortgage term, too many of them are going to stop "investing the difference" at some point, or at some time during that fifteen years and mess up the practicality of the idea.

Some of these scenario's are great on paper, but follow through for most is lost at some point.

I would rather say, go for the fifteen year mortgage, manage your budget better, AND through proper budget management, come up with that same (in your scenario) amount of money and invest it. Everyone is better off then!

So you would advice people to take a higher risk, be in a worst financial picture base on some personal assumptions?

Steve · 02-09-2007, 07:29 PM

No, but if they can't afford the 15, (in your situation saying it's high-risk,)then they also can't afford the duration of 30 plus the difference, which means they're in the wrong house!