This is the Truth Network. Um Welcome to Finishing Well, brought to you by CardinalGuide.com with certified financial planner Hans Scheil, best-selling author and financial planner, helping families finish well for over 40 years. On Finishing Well, we'll examine both biblical and practical knowledge to assist families in finishing well, including discussions on managing Social Security, Medicare, IRAID, long-term care, life insurance, investments, and taxes.
Now, let's get started with Finishing Well. Welcome to Finishing Well with certified financial planner Hans Scheil, and today's show. Is on cash value whole life insurance and what an amazing tool it is when you understand it and when it's good and where it may not be. And so today we're going to dig into that. And I can't help but think of 1 Timothy 6:17 that says, Be rich.
in good works, storing up treasure for the time to come. And wow, as you understand all these different financial tools that Hans teaches so beautifully on Finishing Well, you can see that they all store up different kinds of treasure in different ways and different angles based on our needs. But I know that this particular tool, historically, Hans, God has used it in amazing ways.
Well, he has. Pian. You know, I've been in the life insurance business since 1976, so this summer is my fiftieth. being in the business. I started when I was 18 and You know, I've been sitting down, and the purpose of life insurance is to create an estate.
where there otherwise wouldn't be one without the life insurance or to add on to an estate. It it it it's wonderful is that person dies. Yeah. there's money paid from the insurance company to the beneficiaries. Exactly when it's needed.
Yeah. Where this is especially true. Is somebody that has bought term insurance? you know, they're young, they're maybe just got married, they just had a child. Yeah.
They had the smarts to buy you know, uh a million dollars worth of term life insurance or You know, a half a million or a quarter of a million or some significant term insurance. And then this person passes away in an accident or something like that, and now you have a young family that would be broke essentially and they don't know what they're gonna do and yet the family's able to live on and educations happen and people are able to live and keep the house. I mean, it's it's wonderful.
So Term insurance is a place to start. And if you don't have life insurance, or you don't have enough life insurance, or you're just hiding behind I got some at work. And you have Buy some term insurance. I can I can set you up with that. You just give me a call.
And we can work in 50 states in the District of Columbia. It's not very expensive, especially if you're young. to get a big amount of insurance. I just want to make that point in the beginning of the show. But the show is not really about Term insurance, the show is about cash value whole life insurance.
And you say, well, why? If you can buy a big amount of insurance for a low price, term insurance, why would you want to buy cash value whole life insurance, which has a high premium. Or you're going to take a big amount of money. and stuff it into a life insurance policy. Why would you want to do that when you can buy term insurance for much cheaper?
And I want to answer that question. But I want to kind of throw it to you, Robbie. Why would you want to do that?
Well, I know in my case I can give testimony to the fact that we uh when I was younger, read I read a whole lot of books by you know great salesmen, Think and Grow Rich and several, and most of them were life insurance salesmen, and they all gave some strategies that I'm thankful that I took up.
Some of them, uh one of which was You know, to buy a good policy on your wife, which I did. And even. You know, I think we paid $75 a month for this policy for like three or four years before we lost a dealership. And in spite of us going into financial crisis, unbelievable, that. You know, when we ran out of money to make the payments because there was cash value within that insurance policy, it made the payments when we couldn't make it.
And that thing just continued to grow and grow in spite of the fact that we weren't paying anything into it. And years later, I was shocked that here was this cash value. In this policy, that again, we had to hold time. It had Tammy insured, and it was just one of the smarter financial moves. I feel like, you know, I'm not great on these things, but I'll always say, man, this one was like, wow, I'm so glad I did that because she's been insured the whole time.
And plus, it ended up being a pretty nice little nest egg for us. Yeah. I mean Being in the business as long as I have And I've had a lot of success. Especially as I'm an older person. And you know, people will ask me, and I'm a financial advisor, financial planner.
People generally think that I know maybe more than they do about about accumulating wealth having wealth, reducing taxes, all that kind of stuff. But There's people out there in general, kind of, and maybe this is you. Like, what are these real rich people? How did they get. How do they get and keep their money?
And I'm just going to tell you. Most of them own cash value whole life insurance. Yeah. Yeah. And the reason they own cash value, whole life insurance, permanent insurance.
is it's in force When they die. If you die at 45 It pays off. If you die at 65, it pays off. If you die at 90, it pays off.
So it's going to be in force. And it's going to pay its death benefit no matter what age you are when they're dying. Frankly, most people live to an older age. Yeah and most of the passing on and transferring of money happens when the people were old. Not kind of young.
And so The wealthy Have cash value, whole life insurance, permanent insurance. And I'm going to tell you some stories. Walt Disney A borrowed from his life insurance. to build Disneyland.
Okay, uh so Remember, number serves me right, he borrowed $75,000 out of his whole life insurance policy. Borrowed it from himself, essentially, from the insurance company. And that was the money, the stake money. to start Disney land And then the ABC and the T V and Mickey Mouse and all that stuff came afterward. Ray Kroc.
borrowed from his Um life insurance. to multiply McDonald's. J C Penny borrowed from his life insurance. to keep his stores open. during the Depression.
So I could go on and on and on and on. Hans Scheil. borrowed from his life insurance. to start cardinal In 2010, And he didn't pay it back till 2020. That one of the things about cash value whole life insurance is the money that sits in it.
is there and it's available to you The policy owner If you need it. And if you pull it out. You can put it back. And that's exactly what all of these people, including me, did.
So The cash value is more liquid. Than you think it is. Am I making sense to you, Robbie? Oh, yeah. And I guess that's one of the ideas of it is.
You're putting money in it in some ways. It's a liquid investment. You can get it at it if you need it. And I've seen that in Tammy's policy for years: that wow, you know, you could get a loan on it or you could take it straight out, and there's lots of options. which you know, that's it makes it a pretty uh interesting tool for that very aspect.
Well, and so I just gave you some examples of some people who are very well to do. When they're getting their start in their business, so they had to take a risk, they use their life insurance. And my guess is: all of these people. Bought way more life insurance later on when they were super successful. when you would say they didn't even need it.
And that's what made their estate. I want to move on because I don't want to spend the whole time on this. Is the Rockefellers are a real interesting example because the Rockefellers. Um has lasted Six generations. The John D.
Rockefeller. I don't know the amount that he had, but the amount there's like a hundred and ninety some heirs of John D. Rockefeller and their collective net worth is between eight and nine billion dollars now. And that has all perpetuated. Their money lasted.
And Um if you compare them to the Vanderbilts The Vanderbilts were about the same level of wealth. At the same time, And their money. Yeah. Pretty much gone. Um I mean, they're not all poor, but it's just it's nothing like the Rockefellers.
And uh So, yeah, I just, you know, the rock and filler strategy to me, though, I just to touch on it because it's so brilliant. That they that they have a trust that's buying Insurance. Whenever a new Rockefeller is born, you know, obviously the rates are pretty low for an infant. And what a great time to buy the insurance. And it's kept there.
And so it's just automatic for. Like it's just beautiful and it shows. Um that they You know, like the Bible says, that they're invested in generation after generation with wisdom that they use, like Joseph. uh clear back when when they uh set this thing up.
Well, and and so the Rockefeller family And John D. Rockefeller himself. Great philanthropists. I mean, so it's not like they've hoarded all this money. They've just There's You know, eight to nine billion dollars left for these 197 people and their descendants.
But You know, during this time, you could go back and look at the numbers. The Rockefellers just. Donated. And this would be a good time to point out that this show is brought to you by Cardinal Guide. And CardinalGuide.com has seven worries tabs.
And one of those is actually life insurance because it's such an awesome tool. And if you go to CardinalGuide.com, you'll find that tab in a video right along these same lines with cash value, life insurance, and show notes and all sorts of things to compare with what we're talking about today. And again, there at his website, we've got a. amazing resource in Hans's book the complete cardinal guide to planning for and living in retirement. And the workbook that goes right along with it.
It's got lots on life insurance about that in that volume as well. And then, of course, the contact Hans and Tom page because, you know, again, the beautiful thing that they described in this video that's along these lines and that Hans is talking about today, that every budget has a different type of life insurance need, and there's so many different kinds at this point in time. It helps that you got an expert and a friend, somebody you can trust to help you walk through those waters. And so, again, you can go to cardinalguide.com and hit the contacts, contact Hans or Tom page. And we'll be right back with a whole lot more on investment strategy in cash value, whole life insurance.
Investment advisory services offered through Brookstone Capital Management LLC, abbreviated BCM. a registered investment advisor. BCM and Cardinal Advisors are independent of each other. Insurance products and services are not offered through BCM, but are offered and sold through individually licensed and appointed agents. Cardinal Advisors is not affiliated with or endorsed by the Social Security Administration or any other government agency.
Welcome back to Finishing Well with Certified Financial Planner Hans Scheil. In today's show, Cash value. whole life insurance, which is just a wonderful subject. I absolutely love. Uh what you know, God has provided through this product for years, for generations.
Yeah, so You know, the first part of the show, I'm talking about like what the wealthy do, and some people are like they could care less what the wealthy people are doing. And I'm not too worried about them. They're wealthy. But I just want to make the point if there's this Theory out there that, yeah, cash value, whole life insurance, I've heard about that stuff. It's not a good deal.
Yeah, and you know, that's all coming from people typically that don't have much money themselves, and I'm just trying to make the point. that the wealthy people buy this stuff. in volume. And they've got it in force and it's life insurance. But That just is is a great place to put part of your money, I guess is what I'm what what I'm telling you and I want to add one more Peace to that.
And that's this whole idea of bank-owned life insurance. And this is really news to a lot of people. And the acronym for it is Boley. Bank owned life insurance. And so when you When you start looking at the whole country, the US banks There's $205 billion.
of cash value on the books of the banks in the US. There's 3,000 banks. Their own On their balance sheet, and you can just look at it in the public record. Um 3,000 banks have cash value life insurance. as their assets backing up the whole bank.
Did you know that before I told you, Robbie? No. No, I actually... In fact, I watched the video and somehow or another missed that point. But that that when they when you look at their balance sheet A lot of times they're talking about they have all this money in assets.
Some of those assets are life insurance. They are. And you can just put it in AI or Google it. on your bank, if you're just kind of curious, because I did it. I put in the banks that I do business with.
And I I can see right there. The amount of money of cash value Of life insurance that they own and they carry on a balance sheet so so.
So Why do they do this?
Okay. the cash value grows tax deferred, just like it does for you. It does that for a bank.
So they The cash value is larger every year. and they're not paying current taxes on the growth of that cash value. The death benefits from the life insurance come to the bank tax free.
So they hold it till the person dies. They get the death benefit tax free. The yields on the cash value are stable. compared to taxable bonds. It's predictable.
And it's a low volatility asset. It's not moving all over the place. For the bank's balance sheet. And so Um I mean the Federal Reserve has Like guidelines, they don't want them to own more than this much cash value. But They got a whole category for it.
I don't want to go so far as to say they encourage it, but. I mean, you just so again, I'm going to get back. If this is such a bad deal. is putting some of your cash or saving your cash With a in a life insurance policy. Wh why do these banks buy it?
Okay. And they own it on their employees. life and I had insurance companies own whole life when I was an executive of an insurance company, they probably still have those policies in force. And when I die, they're going to get a big payday. Um I mean, they're not going to be sitting there and cheering, but it's just.
It's just a business thing.
Okay. Yeah, it it's genius.
Now, I want to move on to what's the difference between term insurance. and permanent insurance.
Okay. and where are they appropriate.
So term insurance is when you have a big need. Like you're young. Married Little kids. And you got a huge need. I mean, you need a million dollars worth of life insurance, and you have a little itty bitsy budget.
You know, you can hear these ads. you know, a hundred bucks a month. For 200 bucks a month, you can buy this much insurance and you can, on-term insurance. The only problem is it only lasts ten years or twenty years. And if you die in the 26th year, It's expired.
So But that doesn't matter to the young family. I'm not talking about it because it's bad. Where it's appropriate is when you have a big need. And you have a little budget.
Okay. And my suggestion is is that you buy convertible term insurance. You know, and if you had done this, Robbie. you would have been able to buy permanent insurance. near the end of your term.
At standard rates. You wouldn't have to. pay more because of your health conditions. And so buy convertible term insurance, or buy it from a company that sells permanent, but it's term. and you can convert it to permanent insurance.
Yeah. People buy term insurance based upon their need for the death benefit.
Okay. So I've sold lots of term insurance. Haven't regretted much. I mean, it's just, it's the right thing to do for the right person.
Okay. Now let's talk about permanent insurance. Permanent insurance is in force. For your lifetime.
So if you die at 45, 65, 80, or 90. it's going to pay off.
Okay, I mean it's just perhaps it's what what the word permanent means. It has a cash value. your cash value is going to grow. by like let's just say four percent. you know, in a range, maybe less.
Maybe more. maybe as much as five percent. in really good circumstances.
So it's It's not a big yield. I mean it's a very conservative growth, but there's growth there. And that's over the long term. You're not going to get that the first few years. But that's an average over the long term.
The death benefit just like term insurance comes tax free to your heirs, They don't have to pay tax on it. And permanent insurance is based based both upon a need and a want.
Okay. I mean, I own cash value life insurance. Because I need it, because people, there's a financial loss if I die. but a lot of it is stacked on there as a want. Is I got a lot of money in there.
that I've put in there over the years. I've already borrowed it and paid it back once, but I could do it again if I needed some cash all of a sudden.
Okay. Yep.
So that's kind of quick. And I want to finish on So why am I talking to 65-year-old people? about buying permanent insurance. And because it makes financial sense for part of their money. Yeah.
What we do. Often. is we come up with an amount That they're going to pay in premium, and we spread that amount over 10 years.
So in the example I gave on the video, We would put ten thousand dollars a year in there for 10 years. And you say, well, where am I going to get $10,000?
Well, you're probably going to get it out of your IRA.
So we're going to take $14,000 out of the IRA. pay four thousand dollars in taxes, and put the remaining 10,000 in the life insurance, and we're going to do that every year for ten years.
So then we're going to finish. With the ten years. with cash value of Not too much more than $100,000. maybe even a little bit less. And you say, well, why have you done this?
Well, Now we're in a vehicle that's tax free. And the depth benefit of this whole thing is probably $150,000. 140,000. Yeah. Now it's going to grow from there.
Yeah. So, why are we doing this whole arrangement? We need to get money out of a. Pre-tax IRA. and move it into Slowly.
into something where the taxes have already been paid. It's going to go tax-free to my heirs. or to my wife, Yeah. if she's still alive when I die. A lot of times we sell these on both a husband and a wife.
Yeah. The whole concept of the whole thing is to get money into that tax-free. department. And what makes it in some ways better than a Roth. or different than a Roth is you can take the money out use it for something, but then you can pay it back.
And with a Roth you can't do that. If you make a withdrawal out of this Rough. If you did the same thing with a Roth and you're like eighty and you pull out fifty grand. You can't put the 50 grand back. Once it's out, it's out.
So there's a whole bunch of advantages in a whole financial plan where we have people Start stuffing money into a permanent life insurance policy. I've just kind of given an example real fast.
So, this one won't work for everybody, and you've got to be in. reasonably good health to get this. But it's a thing that works well for some people. Yeah, absolutely. Especially You know, when you look at that As an estate, you know, they've got the money right there where tax-free, just similar to a Roth, but with a lot of options while they're in the middle.
And You know, that's the whole idea is having options and looking at these tools. You know, and from my standpoint, having the humility to say, you know, I don't really understand these different products, which ones seem to fit me. Is it an annuity? Is it life insurance? Is it a Roth?
You know, all those things.
So helpful, right? That's what finishing well's all about. Listen, you can make the church the beneficiary of this thing. You can make that special little granddaughter the beneficiary. You can leave it to your kids.
You can split it up. And when I start talking about a tax free inheritance, going to who you want it to go to. All of a sudden people get real interested and then You're not given this. to them until after you die and then the cash value sits in there. getting a decent return And then it's accessible.
I mean, it you you might need some money when you're eighty for something. And you can go get it. Um and not pay taxes on Git. It's a It can make sense as a part of a whole larger financial plan. Absolutely.
Well, we got a Remind everybody now that this show is brought to you by Cardinal Guide at CardinalGuide.com. You're going to find the seven worries tabs. One of those, obviously, is life insurance, as we're talking about today. If you go to that tab, you're going to find this video along these same lines, cash value, whole life insurance, show notes, and all sorts of information, all on the show notes of the same idea of cash value or life insurance. And then it's all in Hans' book, The Complete Cardinal Guide to Planning for and Living in Retirement, and the accompanying workbook also at the website, as well as, of course, the famous contact Hans and Tom page.
Great way to find out about all these different products. Great show, Hans. Thank you and God bless you. The opinions expressed by Hans Scheil and guests on this show are their own and do not reflect the opinions of this radio station. All statements and opinions expressed are based upon information considered reliable, although it should not be relied upon as such.
Any statements or opinions are subject to change without notice. Investments involve risk and unless otherwise stated are not guaranteed. Past performance cannot be used as an indicator to determine future results. Any strategies mentioned may not be suitable for everyone. Information expressed does not take into account your specific situation or objectives and is not intended as recommendations appropriate for you.
Before acting on any information mentioned, please consult with a qualified tax or investment advisor to determine if it's suitable for your specific situation. Finishing Well is designed to provide accurate and authoritative information with regard to the subject covered. Investment advisory services offered through Brookstrone Capital Management LLC, abbreviated BCM, a registered investment advisor. BCM and Cardinal Advisors are independent of each other. Insurance products and services are not offered through BCM, but are offered and sold through individually licensed and appointed agents.
Cardinal Advisors is not affiliated with or endorsed by the Social Security Administration or any other government agency. We hope you enjoyed Finishing Well, brought to you by CardinalGuide.com. Visit CardinalGuide.com for free downloads of this show or previous shows on topics such as Social Security, Medicare, IRAs, long-term care, life insurance, investments, and taxes, as well as Han's best-selling book, The Complete Cardinal Guide to Planning for and Living in Retirement and the Workbook. Once again, for dozens of free resources, past shows, or to get Han's book, go to CardinalGuide.com. If you have a question, comment, or suggestion for future shows, click on the Finishing Well radio show on the website and send us a word.
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