The Best Gift For Your Child
What is the best gift that you can make to your child or grandchild?
A gift that will last a lifetime.
Would you like to make sure that you child or grandchild will be set up for the biggest events in his or her life and also have a very good retirement?
You can set up the child in your life for College, Wedding Day, Buying A House, Retirement, by starting to save early in their life using the power of compound interest, time and a powerful insurance tool. This can be accomplished by just giving up your Venti Starbucks coffee that you have every day.
Start Saving As Early As Possible For The Children In Your Life.
The earlier you start saving money and you let the compound interest to continue to work, the more money will have accumulated into a retirement account. Let the rule of 72 work in your advantage.
This will be the gift that keeps on giving.
Would you be willing to give up your everyday Venti Peppermint Mocha from Starbucks for the next 20 years to guarantee that your new born baby will be a multi millionaire by the time they retire? Every day, instead of spending 6 dollars for coffee, put that money into a piggy bank, at the end of the month pull the money out and make a payment into a tax free retirement plan like an Indexed Universal Life Insurance (IUL).
Understand The Power Of Compound Return Mixed With The Right Amount Of Time
For this example I will use a very conservative 6.25% return. After 20 years of contributions, you would have contributed into that account $43,200, by saving $6 per day. With the 6.25% return that account will have a value of 84,363, after the 20 years. Some people might say that that is not too much.
Now,after 20 years you will stop contributing and let’s say your child, didn’t learn from you the value of saving for retirement and doesn’t want to continue to put money into his/her account, but he/she leaves the money there, to grow.They have no choice, because you as the parent don’t relinquish control over that account until you make sure that your child thinks on their feet. By the time he/she is 65 years of age and retires, the value of that account is … drum roll … $1,394,554. Mind boggling, right?
Let’s assume that your child follows in your footsteps and understands the value of compounding interest and continues the tradition of saving that 6 dollars every day, religiously. He/she will have in their account by the age of 65 … $1,934,080. Do you think your kid will have a stress free and happy retirement? Between you and him/her the amount of money will have been contributed during the 65 years is of only $140,400. Not bad for giving up a luxury cup of coffee a day. See how much that cup of coffee actually costs you.
Think about all of the other things you pay for and you don’t really need or use and how much is actually costs you if instead of paying for, you could save into a compound growing account.
With an Indexed Universal Life Insurance (IUL), this will be tax free retirement income and even though you participate to the growth of the market through an index, your investment is protected against major market downturns through the floor rate. Also, since you will not send your 5 year old out there to work in the corporate world, I don’t see them qualifying for a tax qualified retirement plan. 🙂
Although the above projection does not take into consideration the death benefit costs and maintenance costs that an IUL have, you can see the power that compound interest has. Let’s say your child will not retire with $1.9 million in his/her cash value account, but with $1 million tax free and with a good size death benefit for his/her beneficiaries that will also be tax free and guaranteed even if he/she will pass away at 120 years of age. All of this for $6 a day and for a very conservative rate of 6.25%.
Who Is The Policy Owner?
Do you think that he/she will have a comfortable retirement, even with the rate of inflation? Can you see what that cup of coffee is actually costing you and the future of your child?
You might be asking what will happen if my teenager son or daughter will run crazy (like most teenagers do), bring home the boyfriend or girlfriend that look like just came from a rave, 🙂 declare eternal love to them, ravage the cash savings account and runs away from home?
Well, the child is an insured, not the owner. You can transfer ownership whenever you think your child has become responsible and you see him/her saving for themselves.
You might be asking why an IUL and not other retirement vehicle?
First of all, an IUL provides a tax free retirement. Your kid will not have to share with uncle Sam their millions that have accumulated in their cash value account.
Second, the payments into this IUL account are totally flexible. Let’s say your child will run into some rough times and they will not be able to afford to even save the $6 per day to go towards that account. They don’t have to make that payment.
Third and probably the most important feature of an IUL is that you can borrow money at 0% interest against the cash value. You can borrow money for anything you want in life, be it for college, wedding day, buying a house, etc.
This loan doesn’t eat away from the balance you have in the cash value, hence being called a loan and it doesn’t have to be repaid until your child passes away at an old age. In that case the loan will be paid from the death benefit.
Why Should I Save With A Product That Has A Death Benefit?
You also might be asking: some of the money will go towards paying for a life insurance benefit also, isn’t that going to eat from the cash accumulation?
First of all, the life insurance cost (death benefit) is based on the age of a child and is very inexpensive. A very small portion will go towards the death benefit. Later in life in the retirement years when the cost of insurance will go up, if the account will be structured right, your children will have enough money accumulated to be able to pay for that death benefit and have plenty of money to live their retirement years in style, traveling the world or doing whatever they want to do in their retirement years
Second of all, they will afford a large enough death benefit to leave to their heirs along with any cash value that your child has not spent. Hopefully your child will continue the tradition and will save money for their kids. That’s how generational wealth is being built.
Are You In For The Long Haul?
A lot of people are flabbergasted when they realize how much money can be saved through a lifetime and through the power of compound interest. All banks are using this same method, also the majority of rich people are using it to create generational wealth. Most people can’t believe how easy it is to save so much money for a tax free retirement?
IUL’s have been created for long term savings. If you are looking for immediate returns, go gamble on the stock market directly or go to Las Vegas and keep your fingers crossed. Nothing wrong with using the stock market in day trading, but be prepared for that turning into a full time job and also be prepared for the occasional heartache.
With an IUL you need at least 12 to 15 years of contributions toward the IUL account. If you can do that, the IUL will work perfectly for you. The longer and the more money you can contribute, you will see better results. The biggest factor though is the time you have, for the money to grow.
What If The Economy Takes A Downturn?
Will you have a guaranteed 10% return like you have illustrated here? I am not saying that an Index Universal Life Insurance (IUL) will have a 10% return. In the past 20 years it had an average of about 8%. You can do the math yourself with different projections with different rates and monthly amounts.
There are no guaranteed returns in IUL’s. This is for illustration only. Remember that IUL’s are tied to an index. The index is closely tied to the growth of the US Economy.
There might be years where there is a downturn in the US economy and the only thing that you are sure of, is that you will not lose money with the guaranteed floor rate of 0%. The most used index in IUL is the S&P 500, even though there are IUL products tied to different indexes or a mixture of indexes.
What Are The Requirements For An IUL For A Child?
There are simply 2 requirements for an IUL policy for a child:
- The parent has to have a term life insurance policy, too and the death benefit has to be double the amount of the child’s death benefit in the IUL. It can be only an inexpensive Term Life Insurance with or without Living Benefits (the insurance companies we represent include Living Benefits without charging extra for it)
- If you have more than 1 child, all of the children need to have identical IUL policies set up.
If you would like to learn more about how an Index Universal Life Insurance works and if it is a good product for you, click here
If you would like to learn more about the principles of finance and how middle class America saves for retirement and creates generational wealth, join our hour and a half webinar – How To WIn At The Game Of Money.
If you would like to receive a Financial Needs Analysis to see where you are in your financial journey and to set a financial goal for you and your family, start here.
If you would like to set a FREE ½ hour consultation, check my calendar and set an appointment.
For any questions, contact us
Hegemon Group International, LLC. (HGI) is a marketing company offering a vast array of products and services through a network of independent affiliates. HGI does not provide insurance products, real estate, legal or tax advice. In the USA, insurance products offered through Hegemon Financial Group, LLC (HFG); and in California, insurance products offered through Hegemon Insurance Solutions, LLC (California License #0I0198) – collectively HFG. HFG is licensed in all states and the District of Columbia, except Massachusetts. In Canada, insurance products offered through Hegemon Group International of Canada ULC in the provinces in which it is licensed.
Florin Chris Uta is an independent associate of HGI.
© 2020 Hegemon Group International, LLC