What Is Different About the New Whole Life Products?
Episode 4120th November 2021 • The Fifth Edition by Infinite Banking Authorized Practitioners • John Montoya, John Perrings
00:00:00 00:13:50

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At the end of last year, December 2020, Congress passed the Consolidated Appropriations Act. In addition to its many stimulus measures, it contained a provision that affects permanent life insurance products like the ones we endorse for Infinite Banking.

Has anything changed or do the principles of IBC remain the same? Take a listen and find out.

And remember the best time to start IBC is 20 years ago but the second best time is today!

To schedule a consultation to start your Infinite Banking journey, please visit us at https://TheFifthEdition.com.

And if you haven’t yet read it, be sure to pick up a copy of Becoming Your Own Banker directly from the Nelson Nash Institute.

Transcripts

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- Hi everybody, this is John Montoya.

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- And this is John Perrings.

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- We're authorized Infinite Banking® practitioners

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and hosts of The Fifth Edition.

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(upbeat music)

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- Episode number 41, in this episode,

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we're going to talk about what is different

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about the new whole life products that are coming out

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by all the carriers and we're going to discuss

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how that affects the Infinite Banking Concept®

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and if you're not familiar with what I'm talking about

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regarding new whole life products.

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At the end of last year in December 2020,

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Congress passed the Consolidated Appropriations Act

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and in addition to it's many stimulus measures,

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it contained a provision

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that affects permanent life insurance products

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like the one that we endorse

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for the Infinite Banking Concept,

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which is whole life insurance.

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Effectively, regulators are lowering the threshold

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from the current 4% guaranteed rate on invested premiums

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into permanent life insurance products to help alleviate

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the pressure that life insurance companies are facing

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in the current ultra-low interest rate environment.

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And up until now, we've kind of held off speculating

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how and what would, you know, what changes would take place

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with regards to Infinite Banking and how whole life policies

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are designed but now we've kind of reached the point

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where life insurance companies are actually rolling out

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their new products based on the new interest rates

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and they're discontinuing their current products

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by December 31st of this year 2021.

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So we thought now's the right time to discuss this topic

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and John Montoya is gonna kick this discussion off

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with a little talk on what he's prepared.

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- Yeah so what I have for us today is an email

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that an executive from one of the companies

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that we do partner with

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and I thought it was a pretty profound message

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that he put together, so I wanna give him full credit,

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Marty Smith with Security Mutual Life.

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And just a quick note here,

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what we'll have some of our own commentary at the end

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of this short letter, but also to,

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if you've been listening to the show for a while,

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you'll notice that we never discuss

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specific life insurance companies.

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This is because we are agnostic and we don't believe

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that any one company is better for IBC than another.

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It's all about recommended fit between client

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and life insurance company.

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That said, we do feel that Marty Smith's message is powerful

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and effectively speaks to the entire community

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of Infinite Banking advisors and clientele.

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So here we go, here's the message from Marty.

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So what's different about the new whole life products.

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At first, I was thinking of preparing a handout

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that compares side-by-side the old against the new

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but as I was running the numbers,

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I saw that the premiums were higher

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but that the differences were not that dramatic.

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With the new lower basis of computation rate,

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the premiums increased about 5%.

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After considering these factors, I thought this,

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what I've written now might be the most important message

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to share with you right now.

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So what do these new product changes mean to you,

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your clients and your business?

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If you don't mind, lemme ask you these simple questions.

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Do you, your clients or the life insurance company

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control interest rates?

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No.

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Do you, your clients or the life insurance company control

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what happens in the economy?

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No.

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So what do you and your clients actually control.

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You and your clients control your own behavior.

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If that's the case, lemme ask you three more questions

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about what has not changed.

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Do your clients still need to protect their families

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and their businesses?

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Yes, absolutely.

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And that permanent protection which they need

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and must own in order to trigger a payout

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that's guaranteed to happen comes

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from dividend-paying cash value whole life insurance.

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Do your clients still need to accumulate deferred assets

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to supplement their retirement income?

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Yes, for sure.

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And that accumulation of deferred assets

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on a tax-favored basis which can be accessed tax free

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must still take place using one of

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the best financial products ever created

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for that purpose,

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dividend-paying cash value whole life insurance.

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Do your clients still need access to current assets

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to pay for their major purchases, including cars,

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homes, education, business, equipment, and inventory

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and investments?

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Yes, they need cash every day.

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And that access to current cash and current assets

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which again can be accessed tax free must still take place

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using dividend-paying cash value whole life insurance.

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So what difference do these slight interest rate changes

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make to our whole life insurance products?

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It's as simple as this, in order to get the same result

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as before, when interest rates go down,

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the solution is to put more capital in,

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in order to get the same result as before

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when interest rates go up,

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the solution is to put less capital in.

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Obviously we are living in crazy,

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stressful and unpredictable economic times,

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dividend-paying cash value whole life insurance

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is the antidote to this toxicity.

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You have the same solution.

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You have the comforting answer.

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You have the secure and certain antidote

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to these dangerous economic times.

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This new series of whole life products works great.

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Now, for those who want to understand it a bit better,

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here's what you should know.

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Generally speaking, the difference between the old

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and new is pretty simple.

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The basis of computation rate for the old series was 4%,

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the basis of computation rate for the new series is 3.75%.

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What is the effect of the lower basis of computation rate

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on premiums, dividends, cash values, death benefits,

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cumulative premium breakeven points and MEC limits.

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The new lower basis of computation rate in general

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has these effects.

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when solving for the same death benefit,

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the premiums have increased around 5%.

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The dividends are slightly lower,

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the cash values are slightly lower.

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The growth and death benefits are slightly lower.

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The cumulative premium breakeven for both the guaranteed

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and the non-guaranteed cash values occurs a year

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or two later.

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The MEC premiums are slightly higher.

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Again, what do these new changes mean to your clients

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and your business?

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As my mentor and friend, the wise and wonderful Nelson Nash

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would say, it really means nothing.

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What would have that meant to Nelson?

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What does that mean to me?

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That's simple, who is ultimately in control

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of your whole life policy.

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Who controls how it's designed?

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You do.

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Who controls how it's funded?

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You do.

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Who controls how it's used?

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Again you do.

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You as the policy owner control all these aspects.

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If that's the case, dividend-paying cash value

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whole life insurance is going to work

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whether interest rates go up, go down or stay the same.

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Thanks as always Marty Smith.

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So there we go, John Montoya here,

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if you were thinking about getting started with IBC

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before these product changes went into effect,

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really the best time to get started was 20 years ago.

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I say that tongue in cheek because I can't tell you

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how many conversations I have with people every single year

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for as long as I've been doing this

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and it's the same thing I hear over and over again.

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I wish I would have got started 20 years ago.

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If you did that, great.

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If you happen to miss the cut-off on the existing product,

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well that's okay.

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The new products will still work just fine for IBC.

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Remember IBC is about capital formation and being able

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to have control and access to your money.

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It's not about chasing cash value returns.

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The new whole life products will continue to work for IBC

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just as prior additions worked for IBC, so all is good.

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John, what are your thoughts?

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- I think that letter is really well said

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and I love how he mentioned mentions Nelson Nash

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and I think what you just said is super important.

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The best time to have started this was 20 years ago,

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you know, some people are kind of talking about,

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well, should I try to start a policy now

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before the changes go into effect or should I try to,

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should I wait until the new products come out?

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So the best time to start is 20 years ago.

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The second best time is today

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and if you're in the market for life insurance,

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there's really never any reason to wait or put it off

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because the one thing is true, we never get any younger

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and so the best time to implement something is today

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if you haven't already done it.

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So regarding these changes, I think the big takeaway

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is that you can pay more premium, right?

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So remember, all these calculations

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are actuarial calculations,

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they're not straight interest rate calculations.

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So the interest rates kind of doing something different

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when it comes to whole life insurance.

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When it comes to designing life insurance

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for Infinite Banking, I kind of explain it

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as three primary forces that we're working with.

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We're working with the MEC limit,

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we're working with the total underwriting limit,

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which is the amount of death benefit

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the life insurance companies will allow you to buy

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which is gonna be based on your wealth and your health

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and then there's the premium amount, right?

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And so the actuarial calculations with this new lower basis

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of computation allows for a higher ratio

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of premium to MEC limits

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and it allows for a higher ratio of premium

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to underwriting limit.

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A lot of people when they see that the basis,

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the computation basis interest rate goes down,

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they're looking at that from through the incorrect lens

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where they say, okay, well, the growth

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is going down is true

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but the other side of this is you can pay more premium

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and the biggest cash value policy will be the policy

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that you can pay the highest premiums

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for the longest amount of time,

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that'll be the highest cash value because

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it will be the highest death benefit.

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So what was true before or I should say this,

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what I just said was true before and it's true now,

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I don't see a whole lot of people making a big deal

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out of the, some of these are called the 7,702 changes,

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but you know, it is definitely a discussion out there

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and I think the end result,

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just as the letter you read said that Nelson would say

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is it doesn't matter, get started,

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take control over the banking function in your life

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and everything will be a lot better for you.

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- Amen, that was well said,

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thank you John.

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- Well I think this was a pretty short and sweet episode

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like we've been saying the whole time,

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it's really not a big deal,

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everything is gonna continue working like it has been

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for two centuries and you know,

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it's just, don't get caught up in the noise

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like we always said, don't get caught up in any noise

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out there that where people are trying to talk about,

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you know, the new product versus the old product,

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it's still a really high performing cash asset

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and taking control of the banking function

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as a higher performing activity where all of a sudden,

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the world opens up to you when you have cash.

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- So with what you're saying,

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it makes me think of one huge takeaway

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that I always keep in mind for IBC and it's this,

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it's something that Nelson said

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that when you start a whole life policy,

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when you open a whole life policy,

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you're essentially starting a business from scratch,

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that's really the perspective that every single person

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coming into IBC should have because Nelson would say,

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the business of banking is the most important business

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in the world and if you're not owning a portion

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of that money that exists worldwide

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to become your own banker then you're gonna rely on others,

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that traditional banks that do it for you.

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So it's best to do what you're doing for your income,

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but also you want to be in the banking business.

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So new product, old product, it doesn't matter.

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How you think matters and you need

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to get into the business of banking 'cause if you don't,

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you'll always be reliant on third parties

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for that banking function.

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- Okay, well I think that wraps up episode 41,

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all about the new whole life products that are coming out

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and if you have any questions and you want to understand

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how this could affect you personally,

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you can head over to our brand new website,

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which we just updated, thefifthedition.com.

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You can contact us there,

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you can schedule an appointment if you'd like

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and as part of the new launch,

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I'd like to announce that we also have what we've developed

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as an entire course on whole life insurance fundamentals,

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so if you're the type of person that likes

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to do a lot of research and you like learning online,

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we have an entire soup to nuts course that has everything

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you need to know about whole life insurance to better talk

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to your advisor.

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For all the listeners out there, right on the front page,

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you can get a 50% discount to the course,

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If you wanna head over to thefifthedition.com

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and as usual, we really appreciate you listening

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and we're happy to be the ones to help you understand

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the Infinite Banking Concept all the much better.

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- All right, thank you John,

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thank you everyone for listening, take care.

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