Nothing is good or bad until we have something to compare it to. So let’s illustrate my point. If you paid $1 million for your home and it grew at the compounded rate of 21.25 percent for a thirteen-year period, it would be worth $12,242,291. How many people do you know make this type of tax-free return? No One!
Only investment grade designed life insurance can provide this type of return. In “The Secret Asset” I tell a story about Grandpa John who passed away at age eighty-three, the original life expectancy at the time of purchase, the internal rate of return would have been 13.81 percent tax free.
The tax equivalent return you would have to earn to net 13.81 percent is 21.25 percent in the 35 percent tax bracket. Think about that. What other investment/business do you have compounding year in and year out at 21.25 percent pretax annually? Real estate? No way. Conversely, if Grandpa John had died prior to the average life expectancy of eighty-three, the return would increase. So, when Grandpa John died at age seventy-nine, the IRR return was a whopping 25.25 percent tax free. The tax-free equivalent yield you would have to earn to net 25.25 percent would be 35.35 percent in the 35 percent federal tax bracket!
How much life insurance do you own in your portfolio?