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 2022 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.
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May 2022 – 7 Ideas and Views Newsletter by Van Mueller
More and more studies have become available reinforcing that the biggest issue insurance and financial professionals face as a deterrent to a successful career is not having enough appointments. In fact, the studies verify that only one out of twenty agents in our industry truly make a living wage. Ninety percent of agents write 40 or less applications per year. Tremendously low activity has and always will be the barrier to success in our industry.
Here is my question. Why is something so crucial to success as an agent so poorly trained to agents and so poorly learned by agents? Why do they not have the skills that would allow them to have more appointments and make more sales?
As I declared in last month’s newsletter, I do not believe the industry or trainers like myself help agents develop learning skills to help them incorporate those skills into productive careers. We mostly tell the agents to study rather than practice. Skilled professionals learn one skill at a time and practice until they are instinctive with that skill. Then they add an additional skill and practice until they don’t even have to think about it. This method should continue for their entire professional career. However, for most they never even get started. They study so much they become analytical and are unable to engage and inspire prospects and customers.
Skilled professionals learn one skill at a time and practice until they are instinctive with that skill.
Without exception, the primary and most valuable skill to cultivate for success in our business is the ability to engage and inspire anyone, anywhere and anytime to be interested in meeting with you.
THE ONLY WAY TO DO THAT IS TO ASK INTERESTING QUESTIONS THAT THE CUSTOMER’S ONLY CHOICE IS TO FIND OUT THE ANSWER TO THE QUESTIONS. We don’t teach that very well in the industry. We learn it even worse. This month I will focus on one set of questions that have gotten me and the agents who master them, more appointments that they can run.
Remember, say the questions out loud until you don’t have to think about them. That allows you to do a spectacular job of listening. All of this leads to more appointments, more sales and more success.
This month I am going to share 4 rules that turn into 12 rules that can open a conversation with anyone, anywhere, anytime. The four rules are the rules of 49-10 and 112-12 and 207-22 and finally the rule of 369-24.
I make my living and have qualified for Top of the Table 32 years in a row using the rules of 49-10 and 112-12.
I make my living and have qualified for Top of the Table 32 years in a row using the rules of 49-10 and 112-12.
In order to understand these rules, it is vital that you have a small amount of knowledge about income taxes. For the purpose of this presentation, we will only need to learn about the standard deduction and the 10, 12, 22 and 24 percent tax bracket. Also, for the purpose of this presentation we will only review married couples filing joint tax returns. At the end of this presentation, I will show you how to approximate single people.
The standard deduction for a married couple is as follows:
Both Under Age 65 - $25,900
One Under Age 65 and One Over Age 65 - $27,300
Both Over Age 65 – $28,700
The difference for each category is $1,400. So, if one person in the married couple is over age 65 you add $1,400 to the standard deduction. If both parties in the married couple are over age 65 you add $2,800 to the standard deduction of $25,900 for both people being under age 65. The standard deduction means that for a married couple filing jointly they pay no income tax on the first $25,900 or $27,300 or $28,700 of taxable income depending on the ages of the married couple.
The first tax bracket is the 10 percent tax bracket. The next $20,550 of taxable income over the standard deduction is taxed at 10 percent. 10 percent of $20,550 is $2,055.
Let’s look first at a couple where both people are over age 65. Their standard deduction is $28,700. If you add the 10 percent bracket of $20,550 to the standard deduction of $28,700, the total is $49,250. So that is the rule of 49-10. That couple can make $49,250 of taxable income and be in the 10 percent marginal tax bracket. However, if you divide the $2,055 of tax by the $49,250, the effective tax rate on that $49,250 is only 4.2 percent. Why? The first $28,700 has no income tax liability.
How can this information be used to increase appointments and inspire our customers to take action? Ask great questions. Are you and your family taking advantage of the rule of 49-10? Did you know there is a way to reduce or eliminate the income taxes on substantial amounts of money with little or no cost to you and your family? If you had 45 minutes available in the next week or two, we could ask you a series of questions that would allow you to take advantage of this rule to your benefit. How about later this week or next week?
Did you know there is a way to reduce or eliminate the income taxes on substantial amounts of money with little or no cost to you and your family?
Here’s some examples of how this rule would apply to half of America or more. According to Wage Statistics provided by Social Security every October, 50 percent of Americans make less than $34,000. 67 percent of Americans make less than $53,000.
First Example:
Many Americans live on their Social Security alone. The average Social Security for a married couple is $32,000. What if you asked this couple if they understood they could withdraw $17,000 of fully taxable income from their IRA, 401(k), 403(b), 457 Plan, gains from annuities, capital gains, etc. and first, not cause the customer’s Social Security to become taxable and second, eliminate the income tax liability on that $17,000 forever. Couldn’t that $17,000 be reallocated to an annual premium life insurance or a single premium life insurance or an annuity if the customer is not insurable? If they did that for 5 years, they could eliminate taxation forever on $85,000. If they did this for 10 years, they could eliminate taxation forever on $170,000.
Isn't it true that if the husband and wife wait until they die, and the children or grandchildren inherit in a lump sum that the customer could lose 30 percent of the $85,000 or $170,000? Doesn't that save the family $25,000 to $51,000 in income tax?
How do I know the children or grandchildren will take the money in a lump sum? Statistically, the information is true. Think about it. Even lottery winners take the money lump sum even with excessive taxes. I don't really know how the children will take the money. I ask the parents or grandparents a few questions and THEY TELL ME! I ask them these questions in a humorous way. Mr. & Mrs. Customer, will you promise not to laugh when I ask these questions? If your children or grandchildren have a choice of taking their inheritance over 10 years to reduce the income tax liability or take it in a lump sum regardless of the tax, which do you think they will do? They almost always laugh. They reply, of course they will take it in a lump sum. You should then ask, what if you could dramatically reduce or eliminate the taxes on this money while you are alive without giving up control of the money? At the very least, even if you don't do anything wouldn't you want to know there was something you could do?
How do I know the children or grandchildren will take the money in a lump sum? Statistically, the information is true.
Second Example:
What if you could withdraw $24,000 of fully taxable income over and above your $32,000 of Social Security, and still pay no income tax. That would cause $4,000 of this couples Social Security to be taxable. Added to the $24,000 of fully taxable income you withdrew, that adds up to $28,000. If the standard deduction is $28,700 that would eliminate the income tax on that $28,000. That means you could reallocate $24,000 per year for this couple with no income tax liability. What could you do to benefit this couple with $24,000 made available every year because you know the rule of 49-10.
Third Example:
Let’s say our customer needs $40,000 per year to live. Doesn’t that still leave $9,000 per year that can be withdrawn? If the tax on the $49,000 is $2,055, doesn’t that leave a net $7,000 that can be reallocated annually to a cash value life insurance policy? At the end of 10 years, wouldn’t they have transferred $70,000 of forever taxable money to almost $70,000 of never taxable money that they could use any way they chose without income tax liability. Here’s the best part; let’s say that the $7,000 per year buys $140,000 of face amount. If the effective tax on that additional $9,000 is 4.2 percent or $378 per year or in 20 years $7,560, wouldn’t the death benefit reimburse the family for the income taxes they paid while they were alive? Doesn’t that mean that your client has figured out how to get all their gains out of qualified and non-qualified money without paying one cent of tax out of their own pocket? Ask them if they realize how brilliant they are. They will defer to you. Defer back. Explain that none of this would have been possible had they not been good savers.
Ask them if they realize how brilliant they are. They will defer to you. Defer back.
Example Four:
Now let’s say our customer requires $47,000 per year to maintain their standard of living. Ask them if they are taking advantage of the rule of 49-10. If they have $100,000 of $150,000 in an IRA or 401(k), when the husband and wife die the children could easily pay $30,000 to $50,000 in taxes if the money is taken in a lump sum. If they withdraw the difference between $49,000 and the $47,000, they are living on, the effective tax on that extra $2,000 would be $84. That $2,000 annually could buy a $30,000 to $50,000 face amount life insurance policy and they wouldn’t even be spending the money. They would be transferring the money from their left pocket to their right pocket. At the end of 10 years wouldn’t they have approximately $20,000 of cash value? And the death benefit reimburses the family for the income taxes paid when the money is inherited wouldn’t that mean that the parents or grandparents discovered a way to transfer ALL their money rather than only after-tax money?
Very few agents call on these people because they haven’t determined the opportunity for our customer or for ourselves. I believe it is a huge mistake.
Finally, this is doable under many more circumstances. If one customer is over age 65 and one is under age 65 the rule becomes the rule of 48-10. If both are under age 65 the rule becomes the rule of 46-10. Think about this; what if you could show a couple over age 59½ with an income of $43,000 that they could take $6,000 of fully taxable money out of an IRA or 401(k) or gains on an annuity and only pay an effective tax rate of 4.2 percent or $252 per year of additional tax. Because they are younger, could they create more death benefit? Would that be better than creating more fully taxable income in a 401(k) or IRA? Our customers truly DO NOT understand tax deferral. Based on everything you see happening in our economy, aren’t people who are tax deferring creating an income tax time bomb for themselves in the future?
Wouldn’t a wonderful conversation about the rules of 49-10 and 48-10 and 46-10 help our customers to understand that they can be in control of what happens in the future rather than be controlled by what happens in the future?
Wouldn’t a wonderful conversation about the rules of 49-10 and 48-10 and 46-10 help our customers to understand that they can be in control of what happens in the future rather than be controlled by what happens in the future?
Now, let’s discuss the rule of 112-12 for a married couple filing a joint income tax return where both are over the age of 65. How do we arrive at this rule.
The Standard Deduction: $28,700
The Entire 10 percent Income Tax Bracket: $20,550
The Entire 12 Percent Income: $63,000
Total: $112,250
The marginal tax bracket is 12 percent. The effective tax bracket is 8.57 percent. We arrive at that by dividing the income tax of $9,615 on $112,250 by $112,250 and we arrive at an effective tax rate of 8.57 percent. According to Wage Statistics provided by Social Security, 91 per cent of Americans make less than $112,000 per year. So, with both people over age 65, the rule is 112-12. For one person over age 65 and one under age 65 the rule becomes 111-12 because there is only one person over age 65. If both are under the age of 65, the rule becomes 109-12. Why, because they lose $1,400 of standard deduction for each person not 65 or over.
This extraordinary rule provides so many opportunities that I could write a book just on the rule of 112-12. The rule provides a single digit (less than 10) income tax opportunity to reallocate money in a more beneficial manner than our customers are currently employing.
This extraordinary rule provides so many opportunities that I could write a book just on the rule of 112-12.
First Example:
Social Security reports that 80 percent of Americans make less than $75,000 per year. Let’s begin with a couple over the age of 65 making $75,000 of taxable income per year.
If we have the market crash that everyone is predicting and is already partially occurring, what if we told this couple they could withdraw $37,000 of long-term capital gains and NOT pay any income tax to do that. Do you think they would appreciate preserving those gains especially if there was no income tax liability involved? Why is this possible? Under current income tax law if a customer is in the 12 percent or less marginal tax bracket, they pay no income tax on those gains. Couldn’t you then share how this customer could reallocate this $37,000 to a single premium life insurance policy, or a 10-pay annual premium life insurance policy for $3,700 per year?
Ask the customer if they knew how to effectively use the rule of 112-12. Wouldn’t they want to, at the very least, know about it so they could take advantage of the rule if they decided to. This works because it is not a discussion about product. Also, customers are very interested in rules that work to their benefit.
This works because it is not a discussion about product. Also, customers are very interested in rules that work to their benefit.
Example 2:
Same couple with a $75,000 annual taxable income and both are over the age of 65 filing a joint income tax return Now, ask them to have a little fun with you. Is there someone at the Internal Revenue Service that you have decided you are so madly in love with that you want to leave them a whole bunch of your money?
Again, the difference between $112,000 and $75,000 is $37,000. If this couple withdrew $37,000 per year their effective tax would be $3,219. If you multiply by 10 years this couple could withdraw fully taxable income of $370,000 and only have an income tax liability of $32,190 over those 10 years. If they wait until the husband and wife die the children could easily pay 30 or 40 percent of that $370,000 which would be $111,000 to $148,000. And, if this couple reallocated the money from their left pocket into their right pocket using a cash value life insurance policy, they could transform $370,000 of forever taxed money into never taxed money that they could use any way they want without income tax liability. Ask your customer if that would be worth paying less than $33,000 while you are alive to eliminate the income tax forever? Would it be worth it? If they use the strategy of reallocating to a cash value life insurance policy wouldn’t the leveraged death benefit reimburse the family for the $33,000 in income taxes paid while alive? Doesn’t that mean that the customer and their family isn’t paying one cent of tax out of their own pocket to reallocate the $370,000 of fully taxable money they started with? If you are not going WOW! I wouldn’t know how to make it any better. However, we can make it better. That money can now be used more effectively to offset inflation, provide critical illness and long-term care benefits. It can be used to provide a tax-free income stream for as long as our customer lives.
If set up correctly, it doesn’t have to go through probate. It is incontestable and private. It can be controlled from the grave. It has creditor and predator protection and finally it has Medicaid versatility. The strategy covers a lot of bases.
If set up correctly, it doesn’t have to go through probate. The strategy covers a lot of bases.
Example 3:
Please use your imagination. Whatever the customer’s income is, if it is lower than $112,000 you have recommendations you can make. If they live on $50,000 per year you can recommend reallocating up to $62,000 per year without a large income tax liability. The income tax on the $62,000 would be $5,394 or 8.7 percent. Ask your customer if they should pay that amount now and eliminate the tax on that money forever or should they wait until they die and have the government take 30 or 40 percent of whatever the entire amount is?
Let’s go the other way. If the customer lives on $90,000 or $95,000 or $100,000, they still don’t take advantage of the rule of 112-12. In the 3 examples given they would still be able to reallocate $22,000 of $17,000 of $12,000 per year. By reallocating this money, they could leverage the income tax liability by turning ineffective and inefficient dollars into an effective strategy to eliminate income tax liability on gains with little or no cost.
There are so many opportunities and so many solutions. Annual premium cash value life, single premium cash value life, 10 pay cash value life and annuities if the customer is uninsurable. You must sit down ahead of time and work out all the permutations of this great opportunity to find money that is extremely beneficial to our customers.
You must sit down ahead of time and work out all the permutations of this great opportunity to find money that is extremely beneficial to our customers.
Example 4:
If both people in our married couple are under age 65 the rule becomes the rule of 109-12. Here’s a quick example for your consideration. Let’s say they are 50 years old and contributing to a 401(k) to the tune of $20,000 annually. Let’s also say their income is $80,000 the current value of their 401(k) is $350,000. How do you start a conversation with them? Ask them if they are effectively using the rule of 112-12 or are they allowing the rule to harm them? If I promise all I am going to do is ask questions to help you clarify this important and valuable information and I promise not to try to sell you anything, wouldn’t this be a valuable 45 minutes to set aside?
You can use the rule of 112-12 both ways. What do I mean? Show this couple that these 401(k) contributions only saves them $1,740 in income taxes and that at the very least, when they both die the government will take 30 or 40 or even 50 percent of the value of the whole 401(k). If it grows from $350,000 to $500,000, isn’t it possible that the least amount of tax could easily be $150,000 or 30 percent of the $500,000. Would that be worth saving $1,740 in taxes annually? Of course not. Then show them that instead of building this income tax atomic time bomb called a 401(k) that they could put $20,000 per year in a cash value life insurance policy and build $200,000 of tax-free money in 10 years or $300,000 of tax-free money by age 65 with quite a bit of leverage. What do I mean? A death benefit of $500,000 to maybe $800,000 or $1,000,000. Then they could use the fully taxable 401(k) money income to be off set by the standard deduction and then use the tax-free income stream from the life insurance. They could literally build a tax-free income stream equivalent to or in excess of their working take home income. Amazing! There are so many permutations to the information.
I have obviously run out of time. I will explain in detail in June’s newsletter the rules of 207-22 and 359-24. Remember, please read this information out loud as many times as you can. Once you learn it, you will fill your appointment calendar with so many opportunities, you won’t believe it. Do believe it, however, you are not miles away from success. You are inches.
Let’s get started with the seven ideas.
Idea #1: Harvard Says Asking Questions Is the Way to Do It
This article is self-explanatory. If you think telling people things is the road to success in our business, you have someone who disagrees. John Coleman in the Harvard Business Review believes decision making, problem solving, and critical thinking are all about asking amazing questions. Listening to understand rather than listening to reply is vital. Listening is the key to asking great questions.
The article also discusses using open ended questions and gives wonderful examples. I use closed ended question many times to maintain the direction of our discussions with prospects and clients. Most people have never had visitations from advisors who are interested in their opinion, and it is so intoxicating that they get so involved in their opinion being shared that they lose sight of the objective. Also, the longer the conversation takes, the less interested our customers remain. However, asking open ended questions that don’t lengthen the conversation dramatically are vital. Please read this article. It is Harvard telling you to ask questions.
Title: Critical Thinking Is About Asking Better Questions
https://hbr.org/ (Harvard Business Review, April 22, 2022)
https://hbr.org/2022/04/critical-thinking-is-about-asking-better-questions
Idea #6: Student Loans Are in the News a Lot Lately
Half of the 43 million Americans who have student loans say they currently could not make a payment. Do you think that’s a problem? The outstanding student loan amount is now $1.75 trillion. Payments are paused right now, however what will happen to these 43 million people when they must begin to make payments again?
Title: Half Of U.S. Student Loan Borrowers Say They Couldn’t Pay Today
https://www.nny360.com/ (NNY 360, April 21, 2022)
https://www.nny360.com/communitynews/education/half-of-u-s-student-loan-borrowers-say-they-couldn-t-pay-today/article_865fabc8-e380-535c-9150-401dd6308df6.html
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