LIFE180

The 10 Attributes of Any Asset | Why Everyone Should Have Whole Life

This article is a written adaptation of the video that you can find on my YouTube channel LIFE180.

I'm a strong advocate for whole life insurance, a product I believe is often misunderstood. When we take a step back and consider the attributes we seek in any asset, it's crucial to move beyond product titles such as whole life insurance, IUL, mutual funds, stocks, annuities, bonds, I-bonds, CDs, or a savings account. These are simply tools.

We should shift our focus from pre-programmed notions about their names to identifying the attributes we desire from these assets. It's essential to think about what qualities we want our money to possess, aligning with our values, beliefs, and objectives.

In this content, I will discuss the top eleven attributes that I believe are inherent in every asset, breaking them down to highlight why I consider whole life insurance to be the most potent asset when integrated with other asset classes. The key factor lies in recognizing the numerous attributes it possesses, making it the primary product in my view, surpassing other asset classes.

Ideal Attributes of an Investment Overview

1. Tax Deferred Growth

2. Tax Free Distribution

3. Competitive Returns

4. High Contribution Levels

5. Additional Benefits - Having Multiple Functions

6. Collateral Opportunities

7. Safe / Guaranteed /Can’t Lose

8. Protected vs Creditors and Lawsuits

9. Unstructured Loan Payments

10. Liquidity without Penalty or Taxes

11. Deductible Contributions

The first one is Tax-Deferred Growth might seem like a no-brainer, especially considering the current global financial landscape. The world is grappling with nearly $33 trillion in debt, coupled with a staggering $173 trillion in unfunded liabilities, resulting in a total government perspective debt exceeding $200 trillion. Adding to the complexity, rising interest rates are pushing the cost of servicing this debt higher and higher.

In the US, the recent budget deficit reached a multi-year high, primarily attributed to the escalating interest rates. It's crucial to recognize that servicing the interest on the substantial $32 trillion (almost 33 trillion) debt is a tangible and pressing obligation.

When I emphasize the concept of tax-deferred growth, it's because deferring taxes allows for the accrual of tax-deferred growth. This is often lauded, and rightly so. People commonly recognize the tax-deferred growth in their 401k, which is indeed valuable.

However, it's crucial to scrutinize the distribution aspect. While the 401k excels in providing tax-deferred growth, it lacks the benefit of tax-free distribution. This brings us to the second critical aspect: the desire for Tax-Free Distribution, a key component that complements tax-deferred growth.

I'll quickly run through this list, and then I'll circle back to delve into specific areas that I want to emphasize in more detail.

The third is Competitive Returns, it is a universal priority when considering where to invest money. Ensuring that the returns on investment are competitive is a common objective for anyone looking to allocate their funds wisely. It's a fundamental principle, seeking opportunities that not only preserve capital but also generate satisfactory returns.

I prioritize High Contribution Levels, recognizing their significant impact. Roth IRAs, while fantastic, pose a challenge as they have income limits for contributions. Even if you manage to contribute, the limitations may hinder you from allocating sufficient funds to accomplish your financial goals independently. Supplementing with additional savings or alternative investment strategies becomes necessary to bridge the gap.

Desiring Additional Benefits from your money involves optimizing its functionality and assigning it multiple roles. The concept is to make one dollar serve various purposes, enhancing financial efficiency and overall effectiveness.

This approach not only boosts the efficiency of your money but also contributes to achieving financial objectives with increased predictability and reduced risk. It's a significant aspect of financial management.

Seeking Collateral Opportunities is a crucial aspect of financial strategy. The ability to leverage the money saved as collateral can unlock significant opportunities. Many individuals utilize 401k loans for this purpose, and with whole life insurance, policy loans provide another avenue. While policy loans with Indexed Universal Life (IUL) are an option, caution is advised. This opportunity to use saved funds as collateral is substantial, and I'll delve deeper into this topic shortly.

Ensuring the safety of your money is a top priority, avoiding losses is paramount. As Warren Buffett famously outlined in his two rules for investing, the primary focus is on not losing money. Starting your financial journey with the foundation of a Safe and Guaranteed account is crucial. This ensures that your initial financial structure is built on a secure foundation where the risk of losing your money is minimized. Establishing this sense of security forms a significant cornerstone in managing your finances effectively.

The desire to safeguard your money against Creditors and Lawsuits is completely understandable. Especially for entrepreneurs and real estate investors who face various legal exposures, such as bankruptcy or lawsuits, it's crucial to shield personal and business assets.

Typically, personal and business investments are vulnerable during such situations. Therefore, strategically placing your money in a Protected environment is a significant advantage. Doing so in the right manner provides an added layer of security, shielding your assets from potential legal challenges or financial setbacks.

Wishing for Unstructured Loan Payments is a crucial consideration, especially when exploring collateralized opportunities. Whether it's borrowing against a 401k or a life insurance policy, having access to unstructured loan payments is essential. Unlike 401ks, which typically lack unstructured loan access, ensuring this component is in place becomes especially important for business owners and real estate investors engaged in projects like flips. The ability to manage cash flow effectively is integral to the success of these ventures, making unstructured loan payments a valuable feature to have.

Desiring Liquidity without Penalties and Taxes is a feature most people would value in an asset. The opportunity cost of placing money in IRAs, qualified accounts, or 401Ks becomes apparent when considering the restrictions on accessing funds until the age of 59 1⁄2.

This limitation is seen as abysmal, as it entails a significant loss of control over one's finances. Avoiding positions where such control is compromised is a crucial aspect, making liquidity without penalties and taxes a highly significant and desirable attribute for any asset.

And ultimately, what we'd desire are Deductible Contributions, providing an added advantage in optimizing tax benefits and enhancing overall financial flexibility.

Whole Life Insurance Has More of these Attributes than Any Other Asset

As we analyze assets with these attributes, my preference leans towards whole life insurance. Breaking it down, whole life insurance checks all the boxes, it offers tax-deferred growth, tax-free distribution, and competitive returns.

Many may argue that a 4.5% internal rate of return in whole life insurance over the long run is not competitive enough. However, I contend that when factoring in tax-deferred growth and tax-free distribution, a 4.5% return equates to a 6.5% to 7% return in a 401k. This is because the growth in a 401k is taxed on the back end, and when accounting for a 30% tax upon withdrawal, the competitive return becomes evident.

Furthermore, when evaluating the safety of whole life insurance, it stands out as a secure and guaranteed option. With whole life insurance, the assurance of not losing your investment adds another layer of financial security.

When we compare whole life insurance to other savings vehicles and asset classes with guarantees, the attractiveness of a 4.5% competitive return in a whole life policy becomes evident. Some may argue that this rate doesn't outperform certain high-yield savings accounts currently available.

However, it's essential to recognize that whole life insurance provides stability, albeit with a slight lag in responding to market changes. The key lies in adopting a long-term perspective, understanding that its reliability and unique features contribute to its appeal beyond short-term fluctuations.

Certainly, while options like high-yield savings accounts or IBONs may offer slightly higher returns, their limitations in liquidity make them less versatile. In contrast, a properly structured whole life insurance policy provides the dual benefits of safety and liquidity, making the 4.5% return especially attractive.

Additionally, considering high contribution levels, the whole life insurance option surpasses the limitations associated with certain investments like I-bonds, where contribution caps may not meet the needs of individuals or entities with higher net worth. The flexibility and combination of features make whole life insurance a compelling choice for those seeking a balanced approach to financial growth.

Whole Life Insurance Is An Inflation Hedge Long Term

Considering the 4.5%, our goal is to outpace inflation over the long term. While we might not achieve that immediately this year, it's crucial to adopt a long-term perspective. While high-yield savings accounts may seem competitive presently, it's essential to note that as interest rates rise, so will life insurance rates, particularly in the case of whole life insurance.

I advise caution, especially regarding index universal life rates and performance, a topic I've extensively covered in my videos. When I discuss this, I'm specifically referring to whole life insurance with a participating mutually held company. As history has shown in the 80s, 90s, and 2000s, when interest rates decrease, returns on high-yield and savings accounts also decline. It's important to be aware of these dynamics for informed financial planning.

What sets life insurance companies apart is their unparalleled ability to manage risk, surpassing any other institution globally. Their unique strength lies in beating inflation over the long term while maintaining the safety, liquidity, and accessibility of your capital. While there may be isolated vehicles offering short-term gains, it's crucial to recognize that consistent short-term decision-making often leads to suboptimal long-term results. To build lasting financial success, it's imperative to adopt a long-term perspective and plan accordingly. This is a crucial aspect to consider.

Whole Life Insurance Allows Your Money To Perform Multiple Duties

Additional benefits abound when your money serves multiple functions, and this is particularly significant with a well-designed whole life insurance policy. This asset stands out for its versatility, offering collateral opportunities, Accelerated Benefit Riders (ABRs), a volatility buffer for retirement income, an opportunity fund, and an emergency fund.

Moreover, in the unfortunate event of chronic, critical, or terminal illness, defined as the loss of two out of six daily living activities or abilities, or cognitive impairment such as dementia, you gain the unique ability to access your death benefit while still alive. The comprehensive advantages provided by a properly structured whole life insurance policy make it a standout choice for financial planning.

I frequently share the impactful story of my father-in-law who battled pancreatic cancer. Faced with the need for alternative treatments, he was able to access the death benefit from his life insurance policy. This financial support enabled him to undergo treatments that cost several hundred thousand dollars. Remarkably, despite the grim prognosis of a cancer that often claims lives within three to six months, he is still here, actively enjoying life two and a half years later, regularly playing golf. It's truly inspiring.

This narrative underscores the significance of making your money serve multiple purposes. Whether it's addressing unexpected health challenges, disability insurance, or long-term care, having a financial tool like life insurance that can adapt to various needs becomes paramount. Many may not fully grasp the importance of such coverage until they face these realities.

Regrettably, many individuals find it challenging to manage various financial commitments such as bills, disability policies, long-term care policies, emergency funds, opportunity funds, and retirement investments simultaneously. Having an account that serves multiple functions becomes crucial in enhancing financial efficiency.

This approach allows you to navigate your financial landscape more effectively, moving towards your goals with greater predictability and reduced risk. It's a significant factor in achieving financial success in a more stable and secure manner.

Whole Life Insurance Should Be Your Financial Foundation

This strategy is rooted in prioritizing safety to ensure that potential losses are minimized. It is essential to underscore this aspect, particularly in the context of financial planning. While I acknowledge the importance of taking calculated risks to achieve your objectives, it is imperative to first establish a robust financial base before delving into more speculative investments.

That's why I strongly advocate starting by placing your money in secure, guaranteed avenues where the risk of loss is minimal. It's essential to ensure that these investments offer a competitive return, beating inflation. This way, you safeguard against losing purchasing power value over time, a significant concern when merely keeping funds in a savings account.

In addition to its multifunctional aspects, having life insurance is another notable benefit. If you have a family or business partners, having life insurance becomes crucial for protecting your loved ones and facilitating buy-sell agreements with your partners. Unfortunately, a significant portion of the population, over 85% in this country, is under-insured when it comes to life insurance.

This is a concerning statistic, particularly considering the potential impact on generational wealth, especially within minority communities dealing with various challenges. Understanding the importance of life insurance could potentially reshape how people approach financial planning over generations. I strongly encourage everyone to delve deeper into this concept and comprehend its significance.

Whole Life Insurance is protected against creditors and lawsuits (typically)

Protected against creditors and lawsuits. Life insurance offers significant protection against creditors and lawsuits in most states. Whether you file for bankruptcy or face legal actions, the funds within a life insurance policy are typically insulated.

This is a key aspect of cash flow hacking. Placing your money in a life insurance policy is an exceptional way to safeguard and insulate your assets. While you may also have entities like an LLC or a trust owning and controlling different assets based on your specific structure and needs, incorporating a life insurance policy adds an extra layer of protection that is unparalleled.

Whole Life Insurance offers unstructured loan payments

Unstructured loan payments come into play when you take out a loan. So, when we discuss collateralized opportunities, whether it's a 401k loan, a policy loan, or any other cash-backed loan, typically, you'll be dealing with structured loan payments. Structured loan payments can have a negative impact on cash flow, especially for businesses with seasonal fluctuations in cash flow.

Being able to manage these payments, whether you're making significant capital purchases for these collateralized opportunities, buying a business, engaging in fix-and-flip projects, or participating in hard money lending, having unstructured loan payments allows you to better navigate cash flow and manage your business.

This flexibility can open up opportunities and enable you to pursue creative endeavors that might not be feasible with other assets. Once again, life insurance is the only asset I know of that provides this flexibility, and I've extensively researched various options.

Whole Life Insurance Offers Liquidity Without Taxes and Penalty

Having liquidity of money without penalties or taxes is a crucial consideration. While qualified accounts allow for tapping into funds, the challenge arises when individuals attempt to access this money. Typically, they face taxes and penalties, especially during market downturns. The scenario often involves liquidating underperforming assets, sometimes after a significant loss of 10 to 30%.

Consequently, they end up paying taxes and penalties, resulting in a substantial reduction in their initial funds. To illustrate, if you started the year with $100,000, you might find yourself liquidating only $40,000 to $50,000, factoring in taxes, penalties, and losses. This underscores the significance of having access to liquid funds without incurring such financial setbacks.

Do You Want Tax Deductions?

And, ultimately, we come to deductible contributions. Now, this is the key element you might want to consider. It's the only aspect that whole life insurance doesn't encompass. When we discuss deductible contributions, think about 401(k)s and IRAs where you're essentially deferring taxes with the expectation of paying them later. While you may get a deduction this year, it's more of a deferral from a long-term perspective. If I take the deduction now, I'll likely have to settle the taxes later.

As I mentioned earlier, it's important to acknowledge the likelihood of increasing taxes in the future. While opinions may differ, I believe taxes are on the rise. Given the current state of the world, along with factors like debt, interest rates, and inflation, there's a pressing need to service that debt. This is a significant factor to consider in your financial planning.

What Would Your Life Look Like If You Had Whole Life Insurance

I strongly believe in the importance of paying taxes promptly to have better control over your money. Focus on these 10 essential attributes of whole life assets. Once you grasp these key elements, envision how your life could improve by incorporating collateralized opportunities, strategically managing your finances, and building a solid foundation with financial guarantees.

Consider what your life would look like with the ability to invest without worrying about various financial complexities. By implementing these 10 practices and placing your money in assets that support them, you can enhance your financial efficiency, unlocking a world of opportunities. This approach will shape you into the kind of investor you aspire to be, ultimately guiding you toward your financial goals. That's the crux of the matter.

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I hope you found the information valuable. If you have any questions or need further clarification, don't hesitate to reach out to someone on our team. You can click on the provided link to schedule a free Clarity Call and explore how these concepts might apply to your life. Feel free to contact us; we are here to assist you in any way possible, addressing your concerns in any manner you prefer.

Feel free to reach out directly by emailing me at Chris at life180. I make it a priority to respond to every email and comment I receive. My passion lies in serving people, and that's the driving force behind this channel, to provide clarity in an industry that is often misunderstood. Life insurance, in particular, is one of the most misinterpreted assets globally, including IUL. Unfortunately, these financial tools are frequently misrepresented, and my goal is to help individuals gain a clearer understanding.

I'll reserve further discussion on those topics for upcoming content. If you have any questions or thoughts, feel free to reach out. Don't hesitate to contact me. Until next time, wishing you a blessed and inspirational day.