Waka Flocka Flame, a rapper and businessman, says if you want to be like the affluent, you have to spend like the rich. A few years ago, the artist did an interview to discuss one of his major tactics for preserving and growing wealth: indexed universal life (IUL) insurance.
What is IUL insurance, and why should you utilize it to achieve your financial objectives? Keep reading to learn more.
Waka Flocka says one of his buddies is a financial historian specializing in “analyzing rich people’s spending habits.” That piqued his attention, and he discovered the best strategies to save and invest his money.
“I used to spend money on everything,” Waka Flocka, who has a net worth of $7 million, stated. He now claims to have millions of dollars in an insurance policy from which he can draw as it grows.
What is IUL Insurance and How Does it Work?
Waka Flocka was referring to an IUL policy, which is a form of universal life insurance policy with two main features:
- Death benefit
- Cash account
The real draw is the cash account. It can be used to pay premiums and, more importantly for the wealthy, to make withdrawals and loans. While this is going on, your money can grow at an almost certainly higher pace than bank interest rates.
When federal interest rates are high, banks frequently offer interest rates of less than 1% or, in the case of high-yield accounts, less than 5%. Life insurance premiums for IULs, on the other hand, go up based on how well an equity index does.
Do Banks Invest in IULs?
Banks in the United States adopt what’s known as fractional reserve banking, which is just a tiny portion of total bank deposits available for cash, while the remainder is used for lending.
Banks can invest in high-value life insurance policies with cash values exceeding $100,000 thanks to the fractional reserve system. They frequently put their money into life insurance owned by a bank (bank-owned life insurance or BOLI). It’s a mechanism for banks to grow capital, protect assets from taxes, and pay for staff benefits.
As an alternative to BOLI, some banks may employ an IUL product (the two are fundamentally similar).
Should You Invest in IULs To Avoid the Middleman?
Individuals that invest in high cash value IULs effectively bypass the middleman (the bank). An IUL, like whole life insurance, pays out a death benefit. It also offers other benefits that aren’t subject to market fluctuations, including tax-free growth.
IULs are safer than stocks since they guarantee that you will not lose a large sum of money. In many circumstances, they provide a floor rate (often 0% to 0.75%), which means you can’t lose any money. You may also be subject to a cap rate, also known as a participation rate, which denotes a maximum return (typically between 20% and 100%).
Most IULs have a UCI feature (uninterrupted compound interest), which allows you to withdraw money without disrupting the interest cycle.
Because the funds in an IUL account are secured against lawsuits, they are ideal for high-profile people.
However, the downside is that you must pay premiums and expenses. You can figure out if an IUL plan is a good place for your money by comparing the cost to the possible profits.
I grew up in Dubuque, Iowa, where I learned the concepts of hard work and the value of a dollar. I spent years in Boy Scouts and achieved the honor of Eagle Scout. I graduated from Iowa State University and moved to Chicago and spent a few years managing restaurants. I then started working in financial services and insurance helping families prepare for the high cost of college for their children. After spending years in the insurance industry, I moved to Arizona and started working with Federal Employees offing education and options on their benefits. I became a Financial Advisor / Fiduciary to further help people properly plan for the future. I enjoy cooking and traveling in my free time.
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