Tax-Free Retirement

Chris Bay:Welcome to the Life Success Legacy podcast. My name is Chris Bay and I’m joined today with the founder of Life Success & Legacy, Mike Everett. Hey Mike, we’ve been talking about the four areas that Infinite Banking can address for people. First was eliminating debt rapidly, typically in 3 to 8 years, by turning the wind current. Our last podcast we did, we talked about how to finance everything in your life and applying economic value added or EVA, or as Nelson says, “Don’t steal the peas.”

Chris Bay:

In this next conversation, what I’d like to talk about that I think is going to be really interesting to people, and that is how to get tax-free retirement. Most of us have come up during a time period where we have been told to put our money into certain kinds of tax qualified plans or markets or things like that. So what I’d like for you to do is kind of describe the landscape of what most people know about. Most of the noise that we hear out there about retirement. Let’s talk about that first. And then what we want to do is transition to what are alternatives for that.

Mike Everett:

Okay. So here’s the way I did things before I learned about the Infinite Banking concept. I got taught to put my money aside into a 401(k), an IRA, a mutual fund, and I was going to do this systematically over a time period.

Chris Bay:

Mm-hmm (affirmative).

Mike Everett:

You start out when you’re 25 to 35 years old and you start putting your money aside. Now, you’re supposed to do it systematically, and you’re going to do it tax-free right now, is that correct?

Chris Bay:

That is correct.

Mike Everett:

Okay. So you’re going to think through this thing with a customer or a client and help them understand why these things do or do not work. So one of the questions that I ask right off the bat is, are income tax is going to go up or down?

Chris Bay:

And if you look historically, the answer is yes.

Mike Everett:

That’s correct.

Chris Bay:

It’s going to go up.

Mike Everett:

The second question I would ask somebody is, number two, the money that you have in your checking account or under your mattress, is it worth more today or is it worth more tomorrow?

Chris Bay:

Today due to inflation.

Mike Everett:

That’s correct. Well, they keep cranking out dollars in the basement of the White House. And so the dollars are going down. Well, number three, when thinking of income taxes, you want to pay on the seed, the little amount, or do you want to pay on the harvest, the big amount?

Chris Bay:

I’d rather pay on the little amount.

Mike Everett:

But yet everything that we’ve been taught to do with our money, we take money, we set it aside income tax-free into a retirement plan, an IRA, a mutual fund, and it grows income tax-free. And then 20 or 30 years from now is when we start pulling money out. And you and I both agree that income taxes are going to go up and the value of the dollars are going to go down. So the dollars that we’d have access to 20 or 30 years from now are worth less or worthless, whichever you like.

Chris Bay:

So we’re paying higher taxes with dollars that are worth less. And all those tax qualified plans are assuming that that money is going to increase. But I remember a conversation with a teacher back in 2007, 2008, who came in and announced in the fall that she was getting ready to retire. And we celebrated. And yet in the spring, she came back into my office and said, “I’m not going to be able to retire.” And the reason was, what happened in 2007, 2008?

Mike Everett:

We had our fallout [crosstalk 00:03:42] financially.

Chris Bay:

That’s right. So the market crashed. So her money that was sitting in one of those tax qualified plans, they lost a great amount of it.

Mike Everett:

I guess. So the question is, was there money guaranteed?

Chris Bay:

No.

Mike Everett:

There you go.

Chris Bay:

So I filed that away in my head. That was before I knew about Infinite Banking. When I started learning about Infinite Banking and that my money was in some, in a vehicle that was safe, not only safe, but guaranteed by contract to grow, that gave me security. I love that. Okay. So we’ve talked a little bit about how people have been told to put their money into something, [crosstalk 00:04:17] those tax qualified plans. So now I’ve never heard about IBC, let’s pretend, and I want to learn about an alternative. And I’m curious about retirement. Talk to me about what IBC can do for retirement.

Mike Everett:

Well, we talk about this all the time. Really what we’re doing is we’re re-engineering a life insurance policy, so people can have access to their money in an income tax-free environment. So one of the things that Nelson says is people want access to those dollars. Well, they have access to those dollars in an income tax-free environment, because we’re going to show them how to borrow those dollars out of there without actually making the system or the contract null and void.

Chris Bay:

Right.

Mike Everett:

So what we’re trying to do is… I chuckle about this. I say, “How big a check can you write from your checking account?” Well, how much have you put in? The same is true with either your retirement through a 401(k) or with your life insurance policy, the cash values are the equity that you have, how much have you put in? So the more you put in, the greater value you have, that means that the dollars that you have access to will have greater value as well. This isn’t rocket science what we’re doing.

Chris Bay:

Right. So as we’re putting those dollars in, and I like to think of my premiums, my life insurance premiums, rather than thinking of them as bills, I think of them as deposits. And I want to put in as big a deposits as I can so that I have money to take out and finance my life. But also I’m thinking ahead to, let’s say, I want retirement, or as Nelson calls it, passive income, that’s money that comes to us and we don’t have to do anything to earn it. So if I want to be able to pull money from my life insurance policy as retirement money and live on that, how does that work and how does it impact my overall policy?

Mike Everett:

Well, a great example would be in the Equipment Financing section in Nelson’s book, Becoming Your Own Banker. By the way, you can get that on our website at lifesuccesslegacy.com. In this particular section of Nelson’s book, it goes into a great detail about a guy who has a policy. He creates his own policy. And then in the very first section, it talks about him just putting the money in there and never using it.

Chris Bay:

Just leaving it as life insurance, [crosstalk 00:06:50] he really doesn’t understand IBC.

Mike Everett:

He absolutely doesn’t. And so what he does is he makes his premium payments and he leaves all of the money on deposit with the life insurance company. Now, the great thing about it is after he does that, after he gets to retirement age, he has access to $92,000 a year in retirement income. Now, if you knew somebody who got $92,000 a year, you’d be excited, but then Nelson goes into detail in a number of different ways. And we’re just going to move right to the end of the Equipment Financing section, where the more he used it to finance all of the stuff in his life, trucks and equipment, et cetera, et cetera.

Mike Everett:

He had access to more dollars because he utilized the policy and he implemented economic value added. And he made all of those payments back to himself over a time period. So instead of taking $92,000 out a year, he had access to $225,000 a year. The question I always ask then is, did it have anything to do with the insurance company? It had absolutely nothing to do with the insurance company. It had to do with how he functioned with his own dollars.

Chris Bay:

I love that because what it does is it puts the onus, it puts the control on me. And when people say, “Well, what with Infinite Banking can go wrong? What’s the risk.” We always say, “We are the risk.”

Mike Everett:

You are.

Chris Bay:

If we don’t treat the system right. If we don’t apply economic value added, and we don’t put the peas back on the shelf, we are the ones who can mess it up, but it’s not at the risk of the market or anybody else. Well, so then I know in that case of the Equipment Financing in the book that Nelson wrote, I notice that the cash value continues to grow even though he’s pulling out $225,000 a year, how does that happen?

Mike Everett:

Well, by the time you get down the road, the dividends are so large inside these things what’s happening is it’s continuing to buy paid up additions, which adds to the base of the policy, which turned around, increases the death benefit in these things. It’s not magic, but it seems like it’s magic.

Chris Bay:

So he’s pulling out $225,000 a year, right? And his cash value is still continuing to grow, which for a lot of people, one of their main concerns is am I going to run out of money in my retirement? And when you capitalize a policy like this and you let the system grow, the beautiful thing is you’ll never have to worry about running out of money. And oh, by the way, in that Equipment Financing, how much death benefit did he pass on?

Mike Everett:

Well, in the early stages, it was $1.3 million. But as he moved down the road, it was three, four, $5 million. So the numbers just get bigger the more you use it.

Chris Bay:

And that policy was designed for cash value, banking purposes, not death benefit.

Mike Everett:

That’s correct.

Chris Bay:

So isn’t that amazing that we can use it now, but then still be able to pass on assets to our beneficiaries in the future?

Mike Everett:

It’s opposite of everything we learned about money.

Chris Bay:

Yeah. That’s good. Mike, thanks for talking through us a little bit about retirement and passive income and the use of Infinite Banking. Again, we encourage our folks to go to our website lifesuccesslegacy.com. If you haven’t downloaded our eBook, Financial Planning Has Failed by Kim Butler, good friend of ours, we encourage you to do that, that’s free. And also you can access order a book by Nelson Nash, Becoming Your Own Banker. Our next podcast we’re going to talk about is thinking long-term, which is Nelson’s number one principle, and that is, how do you pass on assets tax-free to your future generations? Join us for that. Hey Mike. Thanks a lot.

Mike Everett:

Thanks, Chris.