We look forward to the Van Mueller newsletter every month. It's chock-full of sound bites, sales tips, and eye-opening statistics. Here are our favorite parts of the January 2018 edition. We're sharing the full introduction, and 2 of the 7 monthly sales ideas. If you like what you read, we encourage you to click here and become a subscriber.
Reprinted with the author's permission.
January, 2018 – 7 Ideas and Views Newsletter by Van Mueller
2018 will be an amazing year. This will be a transitional year in the history of our country. There will be so much change that it will become overwhelming for most Americans.
Change is disconcerting: Massive change will create enormous uncertainty and stress for our prospects and clients.
Why am I starting the newsletter this way? We must understand that WE DO NOT sell life insurance or annuities or mutual funds or health insurance or disability insurance or long term care. The amazing agents and advisors sell certainty and control and safety and security and opportunity. Americans will be sorely lacking for those benefits.
Think about this; we have an enormous new tax law. Our healthcare is being dramatically changed again. Debt at all levels is increasing exponentially. Companies aren't just going bankrupt, now countries are going bankrupt. The stock market, bond market, commodities market and real estate markets all face serious challenges in the years ahead. Americans' incomes are not increasing, while inflation is in the beginning stages of having an impact. People are living longer than they have ever lived while the entitlement programs they depend on to support their longevity face more and more financial difficulties.
Even weather has become more and more of a challenge for the American people. Hurricanes Harvey, Irma and Maria caused hundreds of billions of dollars in damages with many people still facing life without electricity or drinking water. The forest fires in California are now the largest in the history of the state with no end in sight. Americans will face floods, tornadoes even earthquakes. As I am writing this, places like Erie, Pennsylvania are facing snowfall amounts that are records. They just got 72 inches in one snowfall and over 100 inches of snow already; that is more than they receive in an entire season. Houston, Atlanta, Mississippi and Alabama all received snowfall before we did where I live in Milwaukee, Wisconsin. We have no snow and its December 28th.
Why am I telling you this? IT IS NOT DOOM AND GLOOM. These changes create uncertainty. Uncertainty creates stress. Stress Kills! We can alleviate uncertainty. We can show our prospects how to not be harmed by these events and more importantly, how to take advantage of these events. That creates certainty. Certainly reduces stress. Americans will love to learn how you can give them back control of their financial and retirement futures. Not only will they buy from you, they will refer you to everyone.
We can show our prospects how to not be harmed by these events and more importantly, how to take advantage of these events.
Let's have a discussion about the new tax law. It is one of the greatest bait and switch legislations ever foisted on the American people. There are good things and bad things in the new tax law for the American people. The law essentially says watch what my right hand is doing but pay no attention to what my left hand is doing.
Let's begin by reviewing the worst consequences of the new tax law.
First, eliminating the mandate requirement under the Affordable Health Care law means healthcare costs for most Americans will increase by a minimum of $1,500 annually. If only sick people buy health insurance then the costs will rise dramatically because there are no healthy people paying into the system. I have paid health insurance premiums for almost 50 years. I have not used my insurance for over 30 years. Having me pay premiums helps control the Healthcare costs of all of us. Not having healthy people paying into the system will surely increase costs and even eliminate choice in many circumstances.
Understanding that concept has always been the foundation of the rock solid insurance industry. Government does not understand the concept. If you are age 50 to 64 you must plan for an enormous increase in your healthcare costs. You must plan for fewer options and less control of your healthcare providers going forward. If you are over 65 it means your healthcare costs will increase dramatically in the future. Here's why.
Our government just passed a tax law that increases our deficit over 10 years by conservatively $1.5 trillion dollars and more realistically by almost $1.9 trillion. Essentially, they are borrowing from the future to provide tax cuts now in the hopes that this will increase our economy's growth. That is called fiscal policy. There are lots of problems with this. First, it assumes people will use their tax savings to buy more things, and businesses will create more jobs. That will not happen. Here is an easy example: Walt Disney Company and Fox merging. Will it create more jobs? No. In fact, consolidation will reduce jobs. Will it create new product? No, Disney essentially bought Fox for its content so they could compete with Netflix. The new tax law makes these kinds of transactions easier.
Our government just passed a tax law that increases our deficit over 10 years by conservatively $1.5 trillion dollars and more realistically by almost $1.9 trillion.
Because the new tax law was passed by a simple majority and not a super majority of 60 to 40, the Pay As You Go Act of 2010 comes into play and requires sequestration. Simply defined, PAYGO and sequestration require spending cuts equal to the tax cuts be incurred automatically. That means no discussions. There are exclusions to sequestration under the PAYGO Act of 2010. No cuts can be made to Social Security, unemployment and veterans benefits, and low income entitlements like Medicaid, food stamps and Supplemental Security Income. Finally, NO CUTS CAN BE MADE TO CONGRESSIONAL SALARIES.
Medicare is subject to cuts and the reduction will be at least $25 billion per year for the next ten years. Won't that mean that Medicare Supplements and Medicare Advantage Plans will be more expensive? Won't there be more out of pocket expense for people over 65 in the future?
Here is a question for all the people under 65. “If your healthcare costs increase in the future, won't that mean there is less money to save for retirement? Won't taxes and losses be even more damaging to the successful achievement of a secure retirement income? What if we could show you how to reduce or eliminate taxes on your retirement money? What if we could show you how to never lose money ever again, yet always be in position to take advantage of downturns and recoveries in the markets? Would that be important information for you and your family?
You are asking if they understand that it is more important to be efficient with their investing and saving in the future.
You are asking if they understand that it is more important to be efficient with their investing and saving in the future.
For people over 65 the questions are different. Will the minimal tax savings you receive be enough to offset the increases in healthcare costs you will face in the future? Doesn't that mean a lower standard of living for you and your spouse? Shouldn't you plan for these increased costs or will you require a reduction in the quality of your healthcare?
Another concern regarding these tax cuts is the annual increase in the deficit which will explode to over one trillion annually beginning immediately. We are already $20 trillion in debt as a country. In 10 years we will be $30 to $40 trillion in debt. When inflation rears its ugly head, and it will, interest rates will rise. This means interest on the debt will become an ever increasing part of the federal budget. What other cuts will have to be made to offset this ever increasing cost of interest on the debt? And, specifically, who will be hurt by most of this ever increasing debt responsibility? That's right, our children and grandchildren. That makes the next questions easy. When you die, who do you want to get your money? Do you want it to go to the government, a nursing home, a hospital or your family? If we could show you a way to stay in complete control of YOUR money until you're done using it and you could leave your money to your family, business or favorite charity instead of the government, nursing home or hospital would you talk to me about it? They always say yes.
You have to set the premise. You have to ask them if they understand the onslaught their children and grandchildren will face in the future. That is what inspires them to take action: Not that you have a good policy. They don't care about that. They care about their families or businesses or charities. They buy what our products do, not what they are.
They care about their families or businesses or charities. They buy what our products do, not what they are.
Those are a few of the bad things. Let's turn it around and review a few of the good things.
- Capital gains rates remain the same with 0% capital gains tax if you are in the 0, 10 or 12 percent bracket.
- Stretch provision of IRAs remains after much duress. I would watch for this to disappear soon.
- Gift tax annual exclusion rises to $15,00 per person in 2018.
- Home exclusion remains the same in 2018.
- Gift and estate tax personal exemption rises to $10 million per person or $11.2 million with the inflation adjustment. That means a husband and wife could shelter $22.4 million from gift or estate taxes with the proper planning. This opens up spectacular planning opportunities for the extremely wealthy. Imagine using that additional amount to buy life insurance. The leverage that would be provided for that family would be astonishing without giving up control of the money.
- Finally, the progressive tax code has been retained and even enhanced. We must help our prospects and clients take advantage of this while they still can. Let's review one example of a couple over age 65.
Here is the 2017 couple first.
If the tax law had not changed, the standard deduction and personal exemption for this couple was $23,400. That means the first $23,400 of taxable income has zero tax because that income was offset by the standard deduction and personal exemption of $23,400. If this couple withdrew $23,400 every year for 20 years they would have withdrawn $468,000 and paid no income tax on those fully taxable withdrawals.
In 2017 the next $18,650 of income would have been taxed at 10 percent. That is $1,865. If you divided $1,865 by $42,050 ($23,400 + $18,650) the percentage is 4.4 percent. If your clients withdrew $42,050 of fully taxable money for 20 years and paid the income taxes on that money every year for 20 years, they would have withdrawn $841,000 of fully taxable money. At this level they would pay 4.4 percent of the $841,000 or $37,004 to eliminate the income tax liability on this money.
The next $57,250 of income is taxed at 15 percent. That is $8,588. If you divide $10,453 ($1,865 + $8,588) by $99300 ($23,400 + $75,900) the percentage or effective tax rate is 10.5 percent. If your client withdrew $99,300 per year for 20 years of fully taxable money and paid the taxes on that money every year for 20 years they would withdraw $1,986,000 of fully taxable money. At this level they would pay 10.5 percent of $1,986,000 or $208,530 to eliminate the income tax liability on the money.
This was the sale. Ask your clients if they would be willing to eliminate the income taxes on $468,000 at zero percent and pay nothing.
Or, pay only $208,530 to eliminate income tax liability on $1,986,000 over 20 years.
Prospects and clients never did the math. When you share the math, prospects and clients were usually incredulous that they could be in control of their income tax liability.
Prospects and clients never did the math. When you share the math, prospects and clients were usually incredulous that they could be in control of their income tax liability.
Well, at least temporarily in 2018 the use of the progressive nature of the income tax code has been enhanced and should be used while it is still available.
Let's look at that same couple over age 65 filing a joint return in 2018.
Their standard deduction has been raised to $26,400. There is no longer a personal exemption allowed. That couple can now withdraw $26,400 of fully taxable income and pay no income taxes because the standard deduction offsets $26,400 of taxable income. If that couple withdrew $26,400 for 20 years they could withdraw $528,000 of fully taxable money and pay ZERO taxes.
The next bracket is the 10 percent bracket. That means the next $19,050 of fully taxable income is taxed at 10 percent. That is $1,905. If you divide $1,905 by $45,450 ($26,400 + $19,050) the percentage is 4.2 percent. That is a reduction from last year's 4.4 percent. If your clients withdrew $45,450 of fully taxable money for 20 years and paid taxes on that money every year for 20 years they would withdraw $909,000 of fully taxable money. At this level they would pay 4.2 percent of $909,000 or $38,178 to eliminate the income tax liability on that money.
Compared to last year this couple could withdraw an extra $68,000 over 20 years and only pay $1,174 more dollars in income tax that the laws allowed in 2017. Think about it. Why wouldn't anyone do this?
Compared to last year this couple could withdraw an extra $68,000 over 20 years and only pay $1,174 more dollars in income tax that the laws allowed in 2017.
The next $58,350 of income is now taxed at 12 percent rather than 15 percent. That is $7,002. If you divide $8,907 ($1,905 + $7,002) by $103,800 ($26,400 + $77,400) the percentage is 8.6 percent.
If your client withdrew $103,800 per year for 20 years and paid the taxes on that money every year for 20 years they could withdraw $2,076,000 of fully taxable money. At this level they would pay 8.6 percent of $2,076,000 or $178,536 to eliminate the income tax liability on $2,076,000. This couple could now withdraw $90,000 more of fully taxable income and pay $29,954 (less) in taxes.
Now, I believe the new tax law allows us to go even further.
Now, I believe the new tax law allows us to go even further.?
The next tax bracket under the new law is the 22 percent bracket. That means the next $87,600 of taxable income is taxed at 22 percent or $19,272. If you divide $28,179 ($1,905 + $7,002 + $19272) by $191,400 ($26,400 + $19,050 + $58,350 + $87,600) the effective tax rate is 14.7 percent.
Think about this; if you withdrew every year $191,400 for 20 years you could withdraw $3,828,000 of fully taxable money. The tax on that would be 14.7 percent or $562,716. If you could eliminate the income tax liability on $3,828,000 and it would only cost you $562,716 would you do it? Of course you would.
It is imaginable that tax on that some $3,828,000 could be a million, a million and a half or even almost two million dollars if left for children to inherit and piled on top of their income.
I will be writing about this every month for the next two or three months. The secret to having success and finding success for our prospects and clients is to establish a more efficient use of their money.
The secret to having success and finding success for our prospects and clients is to establish a more efficient use of their money.
Most people would agree that income taxes will be higher in the future. Shouldn't you pay your income taxes now when you can control the amount of tax liability you will face on that money?
Is there someone at the Internal Revenue Service that you are so madly in love with that you want to leave them a whole bunch of your money? What if you could be in control of your income tax liability instead of allowing the Internal Revenue Service to be in control?
Knowing this information will be the key to your success in the coming years.
Let's get started with the first idea of 2018.
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We're passing on two of the newsletter's monthly sales ideas - every issue of the newsletter contains 7 ideas, plus one idea for the Canadian market. Subscribe to get them all.
Idea #1: What Is Bitcoin?
Many of you have asked me to write about Bitcoin. What is it? How is it mined? Is it safe? Are we in a Bitcoin bubble? Can they be stolen?
Let's be clear; in order to do this justice I could actually write an entire newsletter about Bitcoin.
I will however, answer a few questions and give you a way to access one of the most thorough explanations I have come across about Bitcoin. Bitcoin is a phenomenon called cryptocurrencies.
There will be more and more of these in the future.
It is a currently more of a commodity than it is a currency. It is backed by nothing other than peoples' belief that it has value.
Fraudulent coins are almost impossible to create, however they can easily be stolen if someone gains access to your computer.
We are definitely in a bubble and there are analysts that believe the crash of Bitcoin could initiate crashes in other markets.
Bitcoin is not accepted as currency by the United States government, however there are companies and even several countries including Japan that accept Bitcoin as currency.
Bitcoin is not very liquid, so only money that you can afford to lose should be invested in this commodity.
Anyway, Yahoo Finance provided a 74 questions article that was amazing. You will have a better understanding and a way to access reference material about Bitcoin.
Pay particular attention to the description of Block chain Technology. It is felt that this technology could be the future of investments. This would be a good place to begin to learn about Bitcoin.
Title: 74 bitcoin questions, answered
www.yahoo.com (Yahoo Finance, December 18, 2017)
https://finance.yahoo.com/news/74-bitcoin-questions-answered-202033293.html
Idea #5: Life Insurance Will Become So Important in the Next Decade
I am always looking for third party articles and websites that extol the unbelievable uses and benefits of cash value life insurance.
These two articles should be beneficial to you in two ways. First, they will give you wonderful ideas about how to use life insurance to benefit your prospects and clients.
Life insurance will become a major funding vehicle for long term care costs that will overcome our country's senior citizens.
It will also allow retirees to leverage current assets so they can use them while they are alive while still maintaining the original size of that asset base at death.
Life Insurance can provide income tax free guaranteed retirement for the retirees of our country.
Life insurance replaces lost income for young couples if one of them dies too soon.
Life insurance can be used to maximize charitable donations. The uses are endless and are only limited by your creativity.
Read these articles and become skilled at helping Americans maximize their assets for themselves, their families, their businesses and their charities.
Title: Lifetime Planning with Life Insurance
www.cpajournal.com/ (The CPA Journal, December 25, 2017)
https://www.cpajournal.com/2017/12/26/lifetime-planning-life-insurance/
Title: A Climbing Rope And A Permission Slip: Life Insurance and Retirement Planning
www.insurancenewsnet.com/ (Insurance News Net, December 20, 2017)
https://insurancenewsnet.com/innarticle/climbing-rope-permission-slip-life-insurance-retirement-planning
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