Retire Smart Austin | Episode 133

Cynthia de Fazio  00:28

Welcome to retire smart Austin. My name is Cynthia De Fazio and I’m joined today by Phil Capriotti, senior of Empower Wealth and tax. Phil, how are you today?

Philip Capriotti  00:38

I am feeling wonderful. How about yourself, Cynthia,

Cynthia de Fazio  00:41

I am feeling wonderful. I’m so excited to be in the studio with you. Because I know things have been so extraordinarily busy for you. And yet you always make time to come in and do the shows. I’m just so thankful for that.

Philip Capriotti  00:54

I love it when you’re hosting the shows. And by the way, that color is beautiful on you. Yeah, it’s very, very nice. Well, you always look beautiful, but I like that color on you.

Cynthia de Fazio  01:03

Oh, thank you so much. And your suit. You look very dapper today. Phil, you really do very nice. Love the tie.

Philip Capriotti  01:09

Thank you. Thank you. Thank you. Yay.

Cynthia de Fazio  01:11

So, today’s show is a very special topic. It’s one that we have not spent a lot of time on in the past but a lot of people have questions about them. IUL, is that kind of like an IOU?

Philip Capriotti  01:25

Well, no, it’s not like a- it’s the complete opposite. When you own an IOU it owes you. And it’s a way to take tax free distributions. We’ll get into that later. I’d like to start those up folks with a disclosure. Okay, I want everyone to understand that universal indexed universal life insurance products are not for everybody. Okay. In fact, I’m going to read disclosure, and we’re going to talk about some of the many benefits and features for folks who it would be suitable for, and it would be a good fit as another asset classes, too many folks have two asset classes, or maybe four, they have ETFs. Mutual funds, they have stocks, and they have bonds. That’s not the end of the asset class classes. Okay. I mean, that’s just portfolio asset classes. But there are many other different asset classes that we look at. And I want to look into the tax efficiency of using them in retirement as a way to extract tax efficient retirement income funds. So, let’s talk about the disclosure. An IU L stands for Indexed Universal Life, it can offer certain benefits and features that might make it suitable might make it suitable for you, it’s important to remember that IUL are very complex, you do not just buy these off of the street, you have to make sure that you’re working with a licensed fiduciary that understands the products, and also understands all of the different benefits and features that are offered by all of the of the companies because they’re not all created equal. So having a universal life or an IUL. First of all, I want to start by saying, Folks, if you have any kind of life insurance policies, whether they be cash value, whether they’re term, but especially cash value, or Universal Life, which is a which is not an IUL to it’s a I mean a variable, variable product where it varies up and down. What you want to take a look at is some of these older products are eligible to do a 1035 exchange. Wow. Okay. So, if you have an old life insurance contract that may have 50,000 500,000 or more in cash value, you can many times do a 1035 exchange, not for one reason, because that existing policy you have it was like your grandfather’s life insurance, or your dad’s life insurance. It didn’t provide all of the features that we’re going to talk about, like home health care, like long term care and that type of thing. So, let’s talk about a few of these subjects. So, who would want to own an IUL? Well, the first benefit is a tax-free death benefit. Okay. All right. So many folks want to provide a tax benefit to their loved ones in case they’re not there and they want it to be tax free. So, any life insurance plan as long as it’s not a MEK modified endowment contract, are tax free distributions when you take it as a death benefit. Number one, so many folks, for instance, I recommend to my children, okay, who need are good to have growing families, okay. And they also want to kind of kill two birds with one stone. They want to make sure if they don’t live long enough to complete their plan. They want to make sure that the fan Les has enough resources, God forbid if they’re called to have an early, okay. But if not, then they want to use the living benefits. So IULs have both death benefit and living benefit. Okay. One of the benefits also is it provides for market growth without market risk or volatility. So, this is extremely important to now one of the caveats to that many of these indexed universal life plans have a cap. So, what that means is, let’s use the S&P index, for instance, we get the growth of the index, but not any of the negative sides. So, there’s a tradeoff, what is it? Well, with an indexed universal life plan, you may only get a cap of 12 or 13, or 15%. If the s&p grows in one particular year 15%, okay, all right. But if it goes negative 15%, you have a fixed rate to depend on with many of the IUL is three, four, sometimes 5% Is the floor of fixed rate. And the cap is normally somewhere between 10 to 15%. Okay, so I’m going to trade off, I don’t mind only making 10% or 15%. If the market does 20, as long as I don’t lose money when the market has a negative 1015 or 20%. So, you have that fixed bucket and zero, as we say is your hero. So, you have the potential for market growth without market volatility.

Cynthia de Fazio  06:32

Amazing. Okay, really is.

Philip Capriotti  06:36

I like to tax deferred growth. You know how I am, that’s a crow, we came up with the term what did spike call me, it’ll come to me. I have the DNA of a CPA is what I love. I had the DNA of a CPA, so he’s brilliant. So, when we’re talking about retirement planning, you really want to act like a bean counter, you want to make sure that any plan you implement, number one, it doesn’t run out of income. Number two, it’s tax efficient, you want to make sure that you don’t run out of resources before you run out of life. So, tax deferred growth with IU

l’s, you have tax deferred growth. And depending on how you take distributions in retirement, to use the living benefits, that because you take distributions in the form of policy loans, all of those distributions are tax free in retirement. So, tax deferred growth, and with the right type of plan, not necessarily whole life, although whole life does have tax free loans. IUL have living benefits as well. So, I want to get tax free returns. And I want to re I want to have tax free distributions in retirement.

Cynthia de Fazio  07:52

Well, Philip, we’re gonna be opening up the phone lines in just a moment. But I want to ask you a quick question. How does someone know if this is a right plan for them the Indexed Universal Life? How does someone know if that’s the right fit?

Philip Capriotti  08:04

The first thing that you want to do is you want to talk with someone like myself and like our firm, that’s a licensed fiduciary because we are obligated to always put your best interest first, before we make a recommendation, we’re legally obligated to do that. And I absolutely love that. So, we not only think 2, 3, 4 times before we make a recommendation, we have to make sure it’s suitable. If the advice we’re giving you is in your best interest, not a self-serving interest. And we want to make sure that this is something that really fits into your retirement plan. As an asset class, even with an IUL. We don’t want to put a lot of money in these things. It might be 10% of our retirement income plan distribution. So, we can have flexible premiums also with IUL s. All have folks that will say you know I’m 40 Now, I want to retire at 60 on maxing out my 401 K. But I want to put extra money into some sort of plan. Phil, do you have any recommendations? And first thing I’ll ask is How’s your health? And I say, well, relatively, I might be taking blood pressure or something like that, but no major heart attacks, no major strokes, no major cancer over the last five years. The insurance companies really look at the last five to 10 years when you’re going through underwriting so with an IUL you have to qualify for not just with your dollars, but with your health, but it has no limit. Not has no limit to the amount you can contribute into these plans. So, for many of my high-net-worth clients, they may want to fund an IUL for five years and then start income they want might want to fund it for 10 years 15-20 years, and then turn on income so the plans that we represent and recommend. You want to fund them not for your whole life and This is one of the reasons you might want to if you do have a whole life insurance policy, you may want to consider a 1035 exchange because you don’t want to pay the premiums for your whole life. You want to actually use it as another source like a Roth withdraws tax free as a as a policy loan, which is also tax free. So, we can let you know right away whether it’s suitable or not. But again, it’s you should have an all the above approach.

Cynthia de Fazio  10:28

Well, Phillip, I know you have a very special offer to present, and you only have five spots available this week. Because you have been so incredibly busy. Let’s talk about what that is, before we open the phone line.

Philip Capriotti  10:37

First thing I’d like to do is if you have a portfolio that’s being managed by either yourself or even another advisor, call up and ask for your portfolio review and complimentary Morningstar report. With this Morningstar report, you’re going to understand exactly how much risk is in your portfolio, what your average return is over the last three 510 20 years. And also, what your internal and external fees, we want to go in and take an x ray of your portfolio. And the reason is, in these crazy times we live in we want to make sure that the portfolio is not designed to chase returns. We want to make sure that you have limited downside with respect to market risk, and running the Morningstar report and complimentary portfolio observation and review we give to you as a gift so that you can understand your portfolio much better. The other thing is your written retirement income and social security if you haven’t filed for Social Security yet, ask the caller, tell him I want to find out what’s the best strategy for my wife and I were for me if you’re single to file Social Security. So, this is part of a comprehensive written tax efficient retirement income plan. First Five callers call 888-818-6557 that’s 888-818-6557 or click that little QR code on the bottom right hand of your screen. And I’m gonna bring you to our landing page app page and you can book the appointment Philip.

Cynthia de Fazio  12:14

Thank you so much to our viewers at home that number 888-818-6557 We have to take a very short commercial break here on retire smart Austin but don’t go anywhere. We are talking about Indexed Universal Life today, IUL’s. Stay tuned.

Philip Capriotti  12:32

I watched my parents work, work themselves really to the bone. I saw my father retire at 63 and pass away. Six months later, once he had stopped working, my mom looked at me and she said, You better be an accountant. You better learn a tax law. I went to a private school, got a great education, lived in the library and graduated without any debt. I realized the benefit of being debt free at a very young age. And I also realized the benefit of educating and speaking to people and I liked working with folks who actually needed help. I started my company 17 years ago, and now we employ two CPAs and to licensed tax professionals. We have a legal arm that helps folks design trusts as well as wills. We have an insurance and that offers property casualty insurance, we sell health insurance, Medicare Supplements, long term care life insurance annuities, and we have wealth management that I started to work with Ed slot looking at tax efficient ways to have retirees or soon to be retirees retired tax free if your accountant or CPA is not also your financial advisor, you really have a conflict of interest.

Cynthia de Fazio  14:03

Welcome back to retire smart Austin. My name is Cynthia De Fazio. I’m joined today by Phil Capriotti, senior of Empower Wealth and tax. And Phil a great show we’re having today talking about Indexed Universal Life but we know that there’s also the positive sides right? But there also can be some negative sides.

Philip Capriotti  14:20

There are always advantages and disadvantages to everything in life. Okay, everything is not butterflies, rainbows and lollipops and unicorns and unicorns. That’s right. First of all, normally with IUL s or any type of insurance product, especially something of this nature, you have to understand you purchase it with your health and also with your premiums. The fact that matter is the insurance companies are not stupid. They’re in business to make money and provide services and provide benefits both mutually exclusive, mutually beneficial. So, with it Well, this is not something that you get into and want to surrender a year or two later. This is something that comes along with normally, anywhere from a five, seven to 10-year surrender period, meaning it comes with expenses. Number one, there’s an expense for mortality. If you die before the plan is complete if you die right after the plan is issued. And let’s say the plan is a million-dollar IUL, the insurance company, even though your first premium, may have only been 10, or $15,000, or 20,000, they have to pay that million dollars. So, they want to make sure that you’re committed, just like they’re committed has to be mutually beneficial. So, they do come with surrender, if when you put a plan like this together, it should never be using a large sum of money. And it eight should be within your means. And it should also be an asset class, a small percentage, maybe 5%, maybe 10% of your total, total inclusive retirement income plan. So I want to make that I’ve seen a lot of advisors, they sell the shoes contracts, and folks do not understand what a mortality charges. And that’s if you die early, the company has to be compensated, you know, out of every 1000 policies they sell, they may have 10 people that die in the first year, they may have 20 that die in the second year. So again, the insurance company has to put these they want to make sure that you’re committed as they’re committed. So, surrender charges, and mortality charges, that administrative charges. When you come into the office, when you call up and set an appointment, we’ll explain it, I want to get more back into some of the benefits. Number one, there are no contribution limits. Wow, I have folks that fund these things I want to put 100,000 in for the next 10 years. And I want to pull 75,000 out a year tax free for the rest of my life where I want my income guaranteed 100 Can I do that? Yes, it can. Let’s do the underwriting and see where you qualify. Other thing is estate planning, I want to provide my heirs with a death benefit to pay off the ranch to pay off the farm. We’re getting ready to see a major overhaul the estate tax and gift tax exclusions, all of these things sunset January 1, 2025. Many folks are really concerned that when they pat and they’re also talking about lowering that exclusion right now, you don’t have to pay any federal estate taxes, if you have an estate upwards of $13 million, that’s all going to be going away, potentially very strong potential, that we’re going to be paying estate taxes on anything over four or $5 million. So many folks who may own a ranch, it may have been in their home for their family for generations, they may want to use it as an estate planning tax to provide liquidity upon death of the owner of the parents. Okay, most of the folks that we work with wanted for retirement income, they want to make sure you know, many folks will say, you know, I want to I know I have the Roth, and I plan on pulling 30, 40, 50,000 a year out of that I plan on pulling the earnings from my right, but I want something else, what else? So, I may want to take a policy loan from an IUL. Well, because it’s a policy loan, you’re not extracting cash value, you’re borrowing off the face amount of the policy. And at death, it’s paid back, it’s paid back and along with interest, because again, the insurance company is in business to make money as well. So many folks will build these things designed to pay in for a specific amount of years and then start taking tax free withdraws. And every plan we build guarantees income to at least age 100. And many of them guaranteed income for both spouses till age 100. Okay, so this is part of a tax reduction strategy as well. Many folks use it as supplemental savings as well. And I gotta say legacy planning is extremely important for some of my clients that have high net worth. They want to look at this, they want to set these plans up, they may want to set them up for their grandchildren, I I have clients come in and they say, you know, I’ve done enough for my children, they’re educated, they’re doing well. They’re professionals in their own careers, mainly concerned with their kids want to set something up for my grandkids and in some cases my great grandchildren. So, IULs provide this type of legacy planning and again, it should be tailored with a licensed fiduciary.

Cynthia de Fazio  19:49

Phil, I want to stop you right there because we need to break for a quick commercial I keep going because you have so much to share, but we really (indistinct)

Philip Capriotti  19:57

Just, there’s only so many minutes in our show, but okay.

Cynthia de Fazio  20:01

So sorry to interrupt you. Let’s talk about the special offer you have for the viewers at home.

Philip Capriotti  20:05

Folks, I know many folks have been watching this show for the last couple, sometimes three years. And I’ve had folks come in and they say, you know, Phil, I’ve been watching. It’s almost like I have coffee with you every Sunday morning, before I head on out to church. But I was apprehensive that picking up the phone, I really felt like I was obligated to do anything. Understand folks. I’m here to educate. I want to transfer my knowledge to you and your family. This is a way for giving back for me to be able to give back to your community. These consultations are complimentary, and they’re designed to educate you, dial 888-818-6557 And whether you just started watching the show or whether you’ve been a longtime watcher or listener to our radio program, take advantage of our complimentary consultations come in. Let us show if you have a whole life or even a universal life insurance policy come in. Let’s do a policy comparison. I run a Morningstar report on that portfolio. And let’s make sure that your retirement income plan is structured tax efficiently.

Cynthia de Fazio  21:12

Bill thank you so much to our viewers at home. That number is on your screen. 888-818-6557 what Phil is offering you today is that portfolio X ray, let him take a look at what you currently have in place. And is it the right tax efficient plan for your retirement he is offering you this complimentary consultation today with no obligation we have to take a very short commercial break here at retire smart Austin don’t go anywhere. We have so much more on indexed universal life when we return.

Philip Capriotti  21:44

Most of the folks that we work with are not going to outlive their money. When an individual comes into our firm. The very first question they ask, How do I know you’re going to be here five years from now your financial advisor and your licensed fiduciary this should be a lifelong commitment. It shouldn’t be a revolving door exercise generational planning, we have an opportunity to not only work together with retirees, but having my children work with their children, my grandchildren working with their grandchildren. So, we’re establishing a relationship that will literally go through several generations. I have three children that are actively in the business. My youngest son Parker, who’s 22 is a junior trader. He works in our home office in Phoenix with foundations. He’s in a three-year mentoring program. My son Philip is also a licensed fiduciary he’s 41 years old, he will take over the business and my daughter Lisa, my oldest daughter, who’s 42 also has her securities and fiduciary license as well. This company will pass to my children and hopefully someday to my grandchildren, but in the interim, teaching them through my example. That’s our firm.

Cynthia de Fazio  23:16

Welcome back to retire smart Austin. My name is Cynthia De Fazio. I’m joined today by Phil Capriotti, senior of in power, wealth and tax. And wow, what a huge show we’re having today talking about something that we haven’t talked a lot about before, Indexed Universal Life.

Philip Capriotti  23:31

Yeah, it’s one of these subjects that very few advisors even offer because they simply don’t know enough about it. I’m very fortunate to work with Magellan financial, we have our we have an entire back office that does nothing but compare these plans from one company to another to another. So, what we want to do is a comparison analysis. That’s why I said if you have a life insurance plan, or even a paid-up life insurance plan, let us do a comparison analysis and see if it may be in your best interest or beneficial for you and your family to convert over to an IUL Well, why I already have life insurance. It’s paid up. Many folks one of the other many benefits of IUL is they provide home health care benefits, okay? And long-term care benefits. So many folks say I don’t really want to pay for long term care insurance. You know, if I need home health care or long-term care, I can afford to pay for it myself. Well, many folks with an IUL it’s going to pay one way or another. It’s going to pay when you die, it’s going to pay income during your life, but you may need extra benefits. So, it’s a way of hedging or passing some of the responsibility to the insurance company because these are known Cynthia as the living benefits inside an indexed universal life insurance plan. Wow. They should cover home health care if your whole life plan LLC doesn’t, and it probably does not. In other words, if you cannot perform two out of six daily living activities, this is why we really want to update. Many times, these plans were not as comprehensive as they were when we bought them 30 years ago, 35-40 years ago, even 20 years ago. So, we want to take a look and make some comparisons. Also, with IUL. S, you can take tax free loans, I love that we actually build the plan to, and it’s designed to take tax free income along with Roth along with Social Security along with any other Muni income you may have or any other type of income portfolio income you have. But when we hit all of the above approach, and we have and we have a whole collage of different types of investments, and income sources, we can really put together a comprehensive plan that’s not only effective, but it’s diversified. I don’t want all my eggs in one basket, I want to use separate baskets, and this is a good one. We can also use IUL for charitable giving. So many folks will set up an IUL and they’ll set it up because they’re charitably inclined and we see this a lot. I love the creditor protection.

Cynthia de Fazio  26:15

That’s a wonderful thing. It really is.

Philip Capriotti  26:19

Yeah, so number one, if you have a creditor or a lawsuit, these IU Elle’s they are bulletproof. Okay, so they cannot force you to pull the cash back in most states. Some states, there are exclusions, I want to make sure. You know, depending on whether you live in Texas or maybe New York City, I don’t nothing against New York. I love New York, my brother lived there for years, but not all states, but there are about 1314 states. So, we want to make sure that we have not only creditor protection, but a protection against lawsuits. The other thing is that offers diversified investment options. So, it’s not just your regular stock bond mutual fund portfolio. Again, no market risk, we have upside market potential. And we also have a guaranteed interest rate. Now most of the guaranteed interest rates are only 4%. And in today’s market with the fed with now your mortgage rates, I think at the tariffs seven little over seven as of the airing of the show. So, we want to make sure that we have minimum guarantees, but I’m a big fan of the guaranteed death benefits. So, call our office dial 888-818-6557 Click the QR code. Come on in let’s see if an IUL is right for you.

Cynthia de Fazio  27:40

Phil, thank you so much to our viewers at home most specifically thank you for spending time with us today on retire smart Austin. Be safe, be happy and be blessed. We’ll see you back one week from today. All questions guide those to Phil. Take care.