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Episode Info: Hi everyone, Dan Thompson here. Welcome to another wise money tools video. So we've talked a couple different videos now recently about leverage. Well, let's look at what that really means. Now there are several reasons as you know why we like to use life insurance when it comes to safe money. The plus sign in the equation and in a second here, I'm going to show you how to add leverage to a policy to accelerate it's productivity and its potential income. But first, here's a short list of why we like to use life insurance. It's an important asset to families and to businesses. First, it's very safe. It's called (Tier 1 Assets) basically means even banks can use life insurance and they do use life insurance. They put billions of dollars in it. As a tier 1 asset, what that really means it's the safest place a bank and put money. The second reason is (Guarantees). It's the only asset that can be guaranteed by the company itself. Even banks just use insurance, they don't even use the word guarantee. The next thing is (High Predictability). With whole life policies. The company even tells you how much they're gonna pay you the coming year. The next thing is (High Stability). These things have been around since before the Civil War, some companies have never missed paying their policyholders for 150 years or more. And then we can design the policies with flexibility that can be a big benefit as you go along. Next thing is (Rate Of Return) the rate of return without using leverage is pretty decent, especially because it has some additional tax benefits. When we add leverage that can even look much better. The next thing is the number one legal domestic tax shelter. For decades, both rich and poor have utilized insurance to protect their assets and reduce their tax burden. And then we have estate planning or charitable giving. Using life insurance can protect your estate from estate taxes. And it's an amazing way to give to your favorite church, school or charity. And finally, there's family protection. There's no better asset in the world to pass on to your family then life insurance. It's literally saved many of my clients from financial stress or even financial ruin when they've been able to pass on assets to their loved ones. Okay, so those are some of the great reasons why life insurance fits so well into many people's portfolios. But let's go on to leveraging and how do you leverage your policy to get a real good handle on this. Let's see how a bank uses leverage every single day. What I'm gonna do is pull up this very simple calculator to show you how it works. Let's take a bank making a $10,000 loan as an example. Suppose they charge 5% interest on that one year loan. As you can see that loan, they're gonna make $500 in the year, that's okay. Nothing to be too excited about right. But how does the bank really work? Banks have a little secret sauce that allows them to leverage the loans. You know what it is? It's you and I, its depositors. Ev...
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