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 May 2017 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.
May, 2017 – 7 Ideas and Views Newsletter by Van Mueller
I was going to write an enormous introduction about economics in this month’s newsletter, but after much consideration I have decided to wait until the June issue when I believe we will be very close to the economic turmoil I have been predicting. Please keep your guard up and do not believe what Wall Street and the government are telling you about the economy, unemployment, earnings, taxes, etc. There are serious issues everywhere that must be given consideration in the months and years ahead.
You will have a thorough examination of those issues in the June issue.
I want to spend one more month on the sales ideas we have been reviewing for the last three or four months of the newsletter. I have two things I wish to discuss in the opening. Why it is a spectacular time to sell life insurance will be the first. Then, I want to explain why our current environment makes this the best time ever to sell modified endowment contracts (MEC’s).
...our current environment makes this the best time ever to sell modified endowment contracts (MEC's).
I know you won’t believe this but for 30 years I have hated selling life insurance. Not because life insurance is bad, but because circumstances made it difficult to explain the illustrations we give. Do you remember what the interest rates were in 1980? They were as high as 18 percent for money markets. Life insurance illustrations used 10, 12, even 14 percent as their illustration interest rate. That was the beginning of the 30 year bull market in bonds. Money market interest rates fell from 18 percent in 1980 to the current one tenth of one percent. 30 year US Treasury’s were paying 13 percent. That means over 30 years those bonds increase in capital appreciation by 200 percent. That does not include the yield which was 13 percent for 30 years. Can you even imagine?
The returns on bonds even rivaled the stock market over those same 30 years.
Here’s the problem: This was why I hated selling cash value life insurance. When I made an initial illustration it was ALWAYS better than the inforce illustration. It didn’t mean that the policy was bad. What it did mean was that I literally had to take time every year to explain why their annual statement was not performing as well as I had initially illustrated. The reason was obvious: Interest rates were declining and kept declining for 30 years. I hated having to reexplain these contracts. It took a lot of time and I felt circumstances were imposing on my precious time.
Now, in retrospect I realize that I was lucky. Those very circumstances required me to meet with policy holders much more regularly than I probably would have under different circumstances. Where am I going with this?
Right now is the greatest time ever to sell cash value life insurance. The process will now work in reverse. As interest rates increase, your in force illustrations will outperform your initial illustrations. Think about this: Your current initial illustrations will very likely be the WORST illustrations your clients will ever see. It is highly likely that over time your current illustrations will be easily out performed as interest rates rise. If you add increased life expectancy with lower cost of insurance that makes this an awesome time to sell cash value life insurance.
Think about this: Your current initial illustrations will very likely be the WORST illustrations your clients will ever see.
Make sure you explain this to customers in the form of a question. “Do you realize this will probably be the worst illustration I will ever show you? Shouldn’t you take advantage of this amazing opportunity?”
Second, this is also the most favorable time ever to offer Modified Endowment Contracts (MEC’s). Many agents are even taught that it is a sin to sell a MEC. It is to be prevented at all costs.
Under normal circumstances that would be the case. However, these are not normal circumstances.
Why are MEC’s usually avoided? Because they lose the tax free withdrawal aspect if they do not meet the definition of life insurance under code 7702 of the Internal Revenue Service. That would be awful in a high interest rate environment. If the policy was returning 5 to 10 percent per year, then a MEC would only be acceptable for clients trying to build legacy and that were sure they would never need to use the money or cash value in that contract.
That is currently not the case and for the foreseeable future it doesn’t look like there will be a significant change. Interest rates hover around the zero percent interest rate.
What other safe money savings vehicles earn around a quarter of a percent or less? That’s right! Savings accounts, money markets, CD’s, short term bond funds, etc. You get the idea. Why not transfer those funds to a single premium life insurance policy, a MEC, which will earn similar returns, but will provide a leveraged death benefit based on age and health and sex?
Why not transfer those funds to a single premium life insurance policy, a MEC, which will earn similar returns, but will provide a leveraged death benefit based on age and health and sex?
Wouldn’t that transfer open a lot of doors for providing cash for living expenses, healthcare expenses and long term care while still providing a legacy benefit for the family or business? Wouldn’t that allow those dollars to do two jobs rather than one?
Let me give you a real life example. I went to visit a 70 year old widow that I had been referred to. We talked for a while. She shared that she had enough income with her husband’s Social Security, his pension and her small pension. She actually saved a little out of that money. She and her husband had also saved an additional $300,000 which she kept in a money market for safety reasons. It was emergency money. She had no intention of ever spending that money.
I asked if she realized what an amazing thing that she and her husband had done. I asked if she realized what a great job of saving they had done. Did she know that 90 percent or even higher of Americans would trade places with her tomorrow if they could? She didn’t believe it was a lot of money. I asked these questions next. Do you know 50 percent of Americans arrive at death or retirement with nothing? 75 percent arrive at death or retirement with $28,000 or less. 90 percent of Americans after an 8 year bull market have $110,000 or less. Finally, according to a brand new report by Fidelity, the average account balance of a 401k is $92,500. I repeated to her what an amazing job she and her husband had done.
I asked her what she earned on that $300.000. She didn’t know and honestly she didn’t care. She just wanted the money to be safe. I asked how we could find out. She said, can you get the information from my tax returns or bank statements? I replied “Yes I could, why not get me the last 5 years of each of those?” She did. It turned out she was making $300 per year on the $300,000: One tenth of one percent. I asked “What if I could transfer that money to a vehicle that would pay the same return, had the same safety but would make the $300,000 look like $550,000 for her family.” She asked how I could do that. I said I would explain how after I showed her why she should consider my recommendation.
I then produced information that showed during the last three years of your life you spend more on healthcare than you do all the previous years of your life combined. Just “Google” that statement and you can get your own information.
I then produced information that showed during the last three years of your life you spend more on healthcare than you do all the previous years of your life combined.
I said to this lady, “Let’s pretend that you never met me. You have to enter a nursing home where you spend the last three years of your life spending $80,000 per year of the $300,000 and then you die. Because you were a private payer you were able to choose a nursing home that is convenient to your family that allows your stay to be tolerable. However, when we subtract the $240,000 that you spent your family only inherits the $60,000 that remains from the original $300,000.
Now let’s say you did meet me before this happens. I would take the $300,000 from your left pocket and move it to your right pocket. It would earn the same $300 per year. It would be just as safe. It would be just as accessible as it was in the savings account. Here is the difference: I could make the $300,000 look like $550,000 at death.
Now, let’s put you back in the nursing home for the last three years of your life. Let’s spend the same $80,000 per year for your last three years of your life and then you die.
I asked, isn’t it funny I have only known you about twenty minutes and I’ve put you in the nursing home twice and killed you twice. Aren’t I a nice person? She laughed. I than asked, “Do you see the difference? You spent the same $240,000 and then died. Now, instead of subtracting the $240,000 from the $300,000 you gave me, we subtract the $240,000 from $550,000 face amount. Your family still inherits the $300,000 even though you used it for your nursing home care. You allowed one dollar to do the work of two dollars. Amazing!
She responded very favorably. I then explained that this was not all of the benefit she would receive.
I asked, “Do you know my plan doesn’t have to go through probate if a beneficiary is named? Do you know my plan was incontestable and private? Do you know you could actually control this money from the grave? Do you know that the plan had creditor and predator protection? And finally, if it was ever necessary, do you know I could convert your lump sum asset into an income stream if you got Alzheimer’s or dementia? This would still give us the opportunity to keep some of the money in the family. She actually got a little upset. She wondered why someone else hadn’t explained this to her. I answered that it didn’t matter. She knew now. What do you want to do? She replied, let’s get started.
She wondered why someone else hadn’t explained this to her.
I replied, “Before we do I have one more question. Have I hurt you by recommending this?” She was a little surprised and not sure how to answer. I asked, “What is the best time to invest in the stock market? When it’s high or when it’s low?” She said low. “If I put you into this plan will you miss out on those opportunities?” She wasn’t sure. I said “you wouldn’t. May I give you an example? The stock market crashes 50 percent. Do you lose any money in this policy? No. Do you have access to the values to take advantage of opportunities like that? Do you remember in March of 2009 when the Dow had fallen to around 6500. The government stimulated with TARP. A $700 billion stimulus package. The DOW rose from around 6500 to 11,000 in seven months by November of that year. That was an 80 percent increase.”
Let’s say we take out $200,000 TEMPORARILY from your policy and make 50 percent or a $100,000 gain. We immediately pay back the temporary loan. Now we have a gain of $100,000. What should we do with that? She replied, Shouldn’t we get another one of those policies? I replied, “You do understand; now we can get started.”
The life insurance MEC is not the investment. It is a foundational product that uses leverage and flexibility to help our clients achieve financial success.
Be creative. Think of all the cases where this idea would be beneficial: Income replacement for clients whose lifestyle is under duress, increased legacy benefit without giving up access to the money or its safety, emergency healthcare costs. I could go on and on.
MEC’s work in this environment because there is little income tax liability. Even a 5 year old MEC with $3,000.00 of gains on a $300,000 single premium would only cause $750 of income tax liability in the 25 percent income tax bracket.
I hope this gives you encouragement to use cash value life insurance and modified endowment contracts to benefit your prospects and clients. Life insurance is the most important product for these times. All it will take to realize this benefit is for all of us to ask everyone if they realize all the benefits they are missing out on.
This is the greatest time ever to sell life insurance and modified endowment contracts. We are the competition. Please don’t miss this opportunity to benefit your prospects and clients.
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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 #2: Students' Parents Are Overwhelmed by College Debt
This is a frightening idea. Because so many parents have taken responsibility for student loans they have co-signed it has put many of their retirements in jeopardy.
Because so many parents have taken responsibility for student loans they have co-signed it has put many of their retirements in jeopardy.
Right now, over 330,000 of those loans have not had a payment in over a year. Another 180,000 are more than a month delinquent.
Nearly four out of ten student loans went to borrowers with credit ratings lower than subprime.
Eight million federal student loans, totaling over $137 billion are in default by more than a year. During the housing crisis the percentage was only 20 percent.
Many seniors on Social Security are beginning to see their Social Security garnished to collect on defaulted student loans of their children.
The total amount of debt is now 1.3 trillion and is still rising.
The government can even take tax refunds to reduce the debt owed on these student loans.
This will only get worse. Wouldn’t life insurance be a way for these people to erase some of this debt at pennies on the dollar? Why don’t we ask people if they would like our help?
Please; you must read this article. It offers so many planning ideas that must be asked of parents and students planning for college. This will be a very big area of planning in the future. Don’t miss this opportunity.
Title: Parents Are Drowning In College-Loan Debt
www.wsj.com (The Wall Street Journal, April 24, 2017)
https://www.wsj.com/articles/the-u-s-makes-it-easy-for-parents-to-get-college-loansrepaying-them-is-another-story-
1493047388
Idea #5: More Uses for Cash Value Life Insurance
It is always awesome to find articles that clearly explain the great benefits of life insurance.
One of the articles stresses the importance of cash value life insurance in retirement. It has quotes from Curtis Cloke and Tom Hegna.
Another shows all the ways you can create a legacy for family, charity, education or even your city or community.
The last article explains how life insurance can help with long term care. Here is the point of this idea: Your sale of life insurance is only limited by the amount of your creativity. If you can show people how to use pennies to buy dollars for all these opportunities without having to give up control of the money they will understand the great financial invention called cash value life insurance. Be creative! Think of all the opportunities you can explain to prospects and clients.
Title: Why Life Insurance Is Essential For Retirement Planning
www.forbes.com (Forbes, April 27, 2017)
https://www.forbes.com/sites/jamiehopkins/2017/04/27/why-life-insurance-is-essential-for-retirement-planning/#5e0ad0ba31cd
Title: 5 Ways to Leave a Legacy With Your Life Insurance
www.yahoo.com (Yahoo Finance, April 8, 2017)
https://finance.yahoo.com/news/5-ways-leave-legacy-life-110000497.html
Title: Life insurance could be answer to long-term care
www.scnews.com (Stanwood Camano News, April 20, 2017)
http://www.scnews.com/news/article_6090fd64-23b9-11e7-848c-33d113c61923.html
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