380 Responses to “Secret 770 Account” — “World’s Most Notorious Asset” Explained

  1. Are 770 plans a scam?

    Thank you for your comments regarding the IRS 7702 tax regulation.
    It has caused me to think about the discussion and write down some remarks to consider.
    First what is the IRS code (like 7702(a) or 401(k))? It dictates how an entity can legally structure a tax return or a tax qualified savings account, etc. So it is the law.
    What is a Whole Life or Permanent life insurance? It is an insurance contract. An insurance contract is protected by the U.S. Constitution because all contracts have the same protection.
    Insurance has been in existence for hundreds of years and a great way to preserve wealth. Most people view insurance as a liability when in reality it is an asset. A properly structured insurance contract can be worth hundreds of thousands of dollars if not worth millions of dollars.
    Laws (IRS code) can change and they do every day, but a contract cannot change unless both parties agree to the changes, so the IRS code can change but the insurance contract must stay intact.
    So when an insurance contract is properly structured, it can be funded so that the funds are immediately liquid, grow risk free (from the stock market), grow tax free and when the individual retires, they can withdraw their retirement tax free.
    So where is the scam? Not all insurance contracts are the same. Not all greedy insurance agents are the same or as knowledgeable. Knowledgeable insurance agents who do right by their customers get paid handsomely and they should because when they can provide a solution that pays their client a 300% increase in spendable income during retirement (when they need it the most) and a steady income that they cannot outlive, then the measly 9% seams minuscule.
    You see cost is only an issue in the absence of value.
    Juxtapose a 401(k) plan to a properly structured insurance contract and eventually the 401(k) will run out of money because the stock market and taxes will take most of it. An insurance contract is not exposed to either.
    The government would love for all their Certified Public Accountants and Certified Financial Planners to direct the public away from 770 plans. The more people who are in government sponsored retirement accounts, the more taxes that they will be able to collect.
    But the wealthy use the 770 plan like a mechanic uses a socket wrench or screw driver. Banks have billions of dollars’ worth of 770 plans.
    Do you think that the wealthy use a 401(k) or even a Roth IRA? Do you think that the 1% use Certified Financial Planners? No!
    If you want to talk about scams?
    Let’s talk about the Federal Reserve, Social Security or the Treasury.
    What is the Federal debt? How much money is the Treasury printing every month? How much is the dollar really worth? Who is paying for our economic inflation? How is the government propping up the stock market? What will happen when the government cannot print money any longer?

    I haven’t even talked about the government planning to take over your 401(k) or IRA.
    Or our US dollar reserve currency status which is in serious jeopardy.
    How long will the US dollar have world reserve currency status?
    In conclusion, the masses (the 99 %) are asleep. They’re busy working harder every day just to keep up with inflation. They watch their TV programs and drink their beer. They believe what the media feeds them. They stopped thinking years ago. They believe that they are entitled and that the government will take care of them and that the government owes them. One day they will be forced to wake up and they will look around and say, “What happened? Where did our country go? Who’s taken it over?”


    • If what you lament and grouse about towards the close of your very excellent and understandable message come to pass then, ergo, the earlier points become moot. I am a bit more optomistic and feel that somehow cooler heads will prevail and that the dollar will not shrink into worthlessness and that the Government will continue to allowcmeans for those with forethought to provide themselves and their heis wiith a secure future. Amen.


    • “Thank you for your comments regarding the IRS 7702 tax regulation…what is the IRS
      code (like 7702(a) or 401(k))?”
      There is no such thing as the “IRS code” nor “IRS 7702 tax regulation” There is, however, the Internal Revenue Code and the income tax regulations thereunder.


  2. Please send me the free special report, “The Secret Investment Account”.
    Thank you.
    Pastor Tom


  3. It’s discouraging, and almost enough to put you off even trying – almost.

    It took me time to realize that and start ignoring those who would make me a millionaire
    - it doesn’t happen. It’s going to take you a little longer to start making money but you can setup free blogs
    on Word – Press.


  4. When I lived in England, these were called “With profits policies”
    They were not scams. There was a specified end date and if you were still alive then, you got the full “with profits” payout. I paid in about 6350 pounds over 34 years at 15.5 pounds a month and received 27000 tax free on the specified end date, an average return of 7.2% tax free. . The best thing in England though was that the premiums were also tax deductible. If you died before the end date, your estate got a minimum of the insured sum of 6350 pounds plus accumulated profits, which were declared annually.


  5. those dividens are nothing but a return on the over charge that the company charges you on those types of policies. these investments are for the rich. the little guy can’t afford them.


  6. If you listen closely to the video, the clues are all there as to what these contracts are. They are Whole Life policies sold by MUTUAL Life Insurance companies.
    Clues: Tax Deferred growth, tax free access to money, not advertised, companies not found on NYSE, unique dividends paid to contract holders not stockholders (that’s who Mutual Companies pay their dividends too), 5% safe return, generally guaranteed at 3%, “peace of mind”, worry free, designed for average investor, not a lot of money needed to start, companies around since 1857, etc. All these clues lead to Whole Life sold through Mutual Companies.
    Indexed UL is an excellent plan too if you want to take on more risk but do not pay dividends. Whole Life through Mutual Companies do. They are a worthy alternative and ultimately provide similar results but with lower guarantees on investment. Typically Indexed UL have a 0% guarantee where as Whole Life typically offer 3%. Both of these contracts allow lump sum investments but MEC limitations will limit the amount that can be invested based on age and the amount of Life Insurance purchased. Only downside, poor health can impact the amount you need to invest and poor health can also lead to outright rejection. For those candidates with poor health, an Indexed Annuity may be a suitable alternative.
    I am licensed in all 50 states and DC if you need more info or wish to invest in “770s”, send an email to goshengroup1@gmail.com. I will respond promptly.
    Dan Murphy, LUTCF, PFS


  7. I have been following this thread ever since the posting of the original article. I added a couple of littler comments but never dreamt that this matter would take on a life of its own. I am both amazed and amused by the plethora of comments ranging from some pretty well thought out, well organized and close to the mark comments to blindly phrased gems of total ignorance (sic!). First off, there are many, many ways to save money, to protect the family, to plan for wealth transfer upon death, to lessen taxation duiring life, and on and on. THERE IS NO ONE SIZE FITS ALL AND EVERYONE SHOULD KNOW THIS in each and every act and action or choice. There are Roth IRAs as well as standard IRAs and a few categories in between, there are 401(k) plans which provide one result, matching plans which are different in their valhue and then Roth 401(k)s. There are plans for the self employed or for employers who don’t mind providing for their employees including defined benefit pension plans which rely upon whole life insurance or annuities for funding (IRS Sec, 412) There is term life which provides low cost protection for the young but which is prohibitively priced (by design) for the older until one reaches the age limit beyond which nothing is available. Whole life policies can lose some of their tax advantages if the premiums exceed the level required to become an MEC or Modifiedf Endowment Contract (IRS Sec 7702(c) I could go on for hours and not cover all bases – I would not surrender a whole life policy to the issuing company, I would sell it if possible to a bank which will gladly buy policies of certain age levels, amounts and not on an insured on the brink of death (2 years). I have been talking pensions and investing for over 60 years, I am an actuary by profession, have a lot of initials after my name for actuarial, investing, insurance and some other achievements and lament when I see the low level of information or willingness to acquire knowledge or to be corrected that abounds – I know many things and have accomplished much in my life and can easily acknowledge that everything I have ever learned is through trial and ERROR (read that “mistakes”) I will be glad to discuss individual situations at harlind@optonline.net If you have read this far, surprise, I am not touting a newsletter or service for money.


  8. At 19, I bought my first whole life insurance policy. It included riders at my desire to add to it in the future. Of course the rate was good, and it was protection that I understood and wanted for my future family and cash value build-up that many scoff at but don’t fully understand. It took very little discipline to keep the moderate monthly payments. It was also through a large American mutual insurance company (owners are the policy holders). Bottom Line: the $25K policy had premiums through 2010 of less than $24K. That sounds large? Well, I opted to have dividends invested yearly into paid up additional insurance. The paid up insurance is now a $101K policy with no premiums for the rest of my life, and cash value of approximately $30K. Plus and more importantly, the mutual company went public and I received stock that today is worth $28K. Maybe not the very best return, but for having the insurance in place over all of that time, and now a policy that will return over 4X the cash tax free to my estate, as well as an investment in a company that is a leader worldwide, is not too bad.
    Recommendation: Do it while you’re young and hold on.


    • I did the name thing at age 22. Over the years the returns range from 4% to 17%. I have $500k of life insurance that in 3 years will be paid for for the rest of my life and cash value is $60k now. I used it twice to pay cash for a vehicle. nothing new here but the high commissions thee guys charge. Get one of these form a fraternal organization like AAL the way I did. Would I have been better off buying term and investing. Maybe. but the word is diversification. I also invested 10% of my income every year. Stocks and real estate as well as whole life.


  9. Unbelievable, the amount of misinformation here, particularly from some of those who profess to be experts. Very hard , I would think, for someone unfamiliar with the subject to draw any useful conclusion from this collection of uninformed part truths, cliches and downright untruths. In addition there is no” one size fits all” as is true for most financial advice, which needs to be tailored to individual circumstances. Best advice is to consult in person with an actual practitioner representative who can hopefully allay some of the fog contained in this blog and present clarity on the issues.


  10. My mother had one of those “Long term care” policies…What a joke!
    The policy was through Met-Life. She had been paying $285.00 per month for 26 years that’s $88920.00; I paid over 7K for her care and Met-life paid back only $236.00. They said that the rest went towards processing – 6800 bucks for processing?
    Be careful if you have Met-Life they are crooks. 3 times they (lost) my papers/recites and then they sent me a bill for over 700 bucks…for her rear payments…she was dead!


  11. Some of the comments in this forum seem to be “plants” to support this 770 plan touted in the video I just viewed. There are far too many claims of benefit with no downside in what is presented. There is no free lunch, and the idea that life insurance as a concept extended back in time to Babylonia is ludicrous.

    Buyer beware! Me smells a rat!


    • Mr. Crable:
      Respectfully, would you please explain “claims of benefit with no downside” and point out
      the referenced blogs?


  12. Just to be clear, “770″ refers to IRS code number 7703 (possibly 7702) which states that the gains in the cash value of a whole life insurance policy are not taxable. So the returns on a whole life policy are similar to in state municipal bonds. One major difference, however, is that your municipal bond portfolio is not protected from creditors, whereas funds in your cash value are protected. While I don’t (yet) have such a policy, I am attracted to it for several reasons. First and foremost, it’s a powerful estate planning tool. Consider what happens if you have a $200,000 pension fund. If you die, that money is passed to your heirs and is subject to taxation. On the other hand, if you paid the taxes on that pension money, say, $50,000 (ouch! but taxes must be paid), the proceeds, $150,000, can be applied towards a dividend paying whole life policy. Depending on your age and health such a premium can buy upwards of $250,000 in life insurance. The cash value will grow, tax free (not deferred) and at your death, the $250,000 benefit goes to your heirs tax free. The benefit increases with age and could be considerably higher. This plan is especially appealing to high net worth individuals, like myself, who are sitting on a lot of cash earning a taxable 1% interest; money which is, by the way, not protected from creditors. So, like me, keep an open mind on this strategy.


  13. Thank you for your comment, Tom. I posted this on another feed, and I want to post it again: If you are thinking about doing this, make sure you are getting the best policy for you. It is a big commitment – be wise! Here are some pointers: Make sure you are going through a Mutual Insurance company that is rated – AT LEAST “A or A+”. Check their dividend rate against their loan rate. If they are charging you a loan rate ( in 2015) of 6-7% or more, that is probably too high.
    And finally (VERY IMPORTANT!): You should be able to break even in no more than 8 years. I have seen MANY policies where they break even in 4 years – so it all depends on your age/health and contribution amount. But if it is taking more than 9 years, you are probably not getting the right policy. After breaking even, you should be getting a rate of return of 4-6% tax-free (for current dividend scale – 2015).
    If you have questions, or if you would like me to check an illustration/contract for you, send me an email or contact me via my website. It will just take me a few minutes to determine if you are getting a good policy that will maximize your cash value, or if you are getting a policy that will maximize an agent’s cash value! Free of charge. Why? This is my ministry, and I want everyone to get the best policy they can possibly have. I am tired of bad insurance agents getting rich at other people’s expense. edgar@arceofinancial.com


  14. “Secret 770 Account” (or “The President’s Account”) Explained

    An IRS tax-code based 7702 Private Retirement Plan under Internal Revenue Code 7702 is an alternative choice to traditional qualified plans such as….. a 401(k), 403(b), SEP IRA, ROTH IRA, Keogh or other tax qualified plan. All traditional IRS qualified plans have restrictions and limits on how much an individual can contribute to their plan annually, and of the few loan options available there are strict rules and hefty penalties. Traditional qualified plans also have IRS penalties if you need income prior to age 59 1/2, or want to leave your money in your account past age 70 1/2. And finally, when you pass away any funds remaining in your traditional qualified plan may be fully taxed prior to transferring to your heirs.
    Remember…..Internal Revenue Code 7702 is an alternative choice to those traditional qualified plans.


  15. Has anyone done a cost benefit analysis on the merits of buying term life for your very basic needs and taking the rest of your money up to the most costly WL/UL policy and just buying stock in the best insurance companies? It seems that since the insurance companies are the one’s most profiting from all of this that this would be a viable option. Thanks.


  16. As a Financial Adviser, primarily in the Life Insurance industry, you have to look beyond the death benefit for these 770s accounts. No life insurance policy should charge you for taking a loan out against your policy, if they do, you should question the nature of your policy. In many cases however, the first 17 – 22 years is crucial for proper accumulation. Just like your 401k or IRA, borrowing against it decreases the actual effectiveness these retirement accounts actually offer. So when you receive your illustrations for the anticipated performance of your policy it is basically stating that if you do not touch the money here is how it will grow. However, one thing you have to keep in mind, and this is very important, with an iUL or Indexed Universal Life policy, you must make the payments, as this policy is only guaranteed in many cases for only 15 years if you make just the minimum payments on it. In most cases Agents do not disclose this information and rely on the documentation written within the policy after delivery to educate the individual who made this purchase. Now I am not bad mouthing Agents, the fact of the matter is most dont realize that is its biggest downside, so if your agent doesnt completely understand it, or does not know how to articulate it, then you should at least ask questions that will force him/her to research that information on your behalf. It makes them a better agent and it makes you an informed consumer. NOW, for something that you must also understand with whole life and indexed whole life, is that just like an IRA or 401k there is a cap on the amount you can fund the policy.

    For example: IF you buy an iUL policy and your Maximum Annual Premium in $30,000, you can invest that much money into your life insurance each and every year to keep it as a tax free retirement vehicle. If you pay more you are penalized with taxes, as it will now convert your life insurance policy into a Modified Endowment, or MEC, which now labels your life insurance policy as an investment and is taxable upon withdrawal.

    Now a MEC is not a bad thing, however you must understand how to use the MEC to your advantage, in many cases you are putting money in with after tax dollars, but paying taxes on the growth of the money. There are very specific strategies for using your insurance policy this way, so it isn’t a bad thing, it is only bad when you do no know what you are doing, or you do not understand what is being explained to you. In the event you want to over-fund your policy contact your agent and speak to them about the pros and cons of doing such a thing, so they can help you understand what will happen and what you can expect. In many cases people believe buying Life Insurance is a very transaction type of business, but in reality they don’t know the power behind such policies. My next topic will be on Term Life and the pros and cons of it. If you have any questions please let me know ill be happy to answer. Just to be clear I am licensed in New York and California and each state may have different guidelines on how these policies are written. So if you are out side of these two states, then you should verify the information I provide you with your local agent.


  17. Understanding Term Life, well there are such big debates as Suze Orman and Dave Ramsey have always advocated for Term Life over Whole Life or Indexed Universal Life. The main reason behind their advocacy can be challenged. I have read in some circles that they are paid by companies such as Prime america to advocate for term life. I am not saying that is true, but with everything out there, you would think that these savvy investor type people who give professional advise would understand the nature of the permanent insurance industry.

    Fact: Only 2% of term life policies ever pay out the death benefit.
    Explanation: People outlive these policies, or the policies are rated every 5 years after the age of 65 to price the policies so far out of reach it forces the policy owner to lapse the policy.

    Why would you invest your money in something that you only have a 2% chance of ever using?

    Buying term insurance with a purpose. Buying Term insurance can be a great strategy to help payoff a mortgage or a car, or debts in the event a loved one passes away during that time. It is used for a very specific purpose. 30 year mortgage = 30 year term policy. 5 year car note = 5 year term policy. I think you understand where I am going with this. Term insurance is not there to take care of you or a loved one while you are still kicking and screaming, it provides a very targeted solution in the event your time expires.

    IN addition, term insurance is basically a gamble that says in such a such time I am going to die. Now, if we all had a crystal ball and can calculate the time of our own demise I am sure we would make certain arrangements to take care of our loved ones while we are gone, essentially that is what term insurance is asking you to do, gamble on your death. I guess the best way to hedge that bet is to find a term policy that carriees a return of premium rider in the event you do not die when the policy expires. That is the best you can ask for when buying term insurance.

    In most cases Term Insurance is very inexpensive prior to age 55. If you try and purchase this insurance after age 55 you can kiss your level premium payments goodbye at age 65. (Are there term policies that offer level premiums? Yes of course, make sure you are buying the right policy for you or you may lose coverage because you cannot afford it.)

    Conversely, Whole Life and IUL is very expensive when purchased around the age of 50 and above. So make sure if you are planning this as a retirement strategy you are on the younger side of 50, it will be less of a blow to your pocket.

    The so called experts claim that whole life or IUL is a waste of money as you are dumping large amounts of cash for a policy that pays out when you die. Well, that is being short sited to say the least. Permanent insurance is used as a tax free retirement vehicle, which can pay out tremendously during your retirement years. For example, I have a client that purchased a 4 million indexed universal life policy. Her monthly premium is crazy high of 3900 per month. If she continues to accumulate that kind of money into her account for the next 22 years her cash value on her policy will be close to 7 million dollars. That is almost double the face value of her policy, and she only contributed 1.02 million into that policy. So the question is, how would you like to damn near triple your investment in 22 years. So she can take lifetime withdrawals from this policy to any amount she is comfortable with starting at the age of 60. Looking further beyond that, she can earn more than 1.02 million in withdrawals, making her policy free. So, looking at it from a different perspective you actually wrote yourself a life insurance with a 4 million dollar face value, that is now worth 7 million, and it was actually free. Talk about your tax free retirement. For those who do not know what the rule of 72 is, it is known as doubling your money every 6 years or 72 months using insurance products to help with retirement. In some cases it takes longer to maximize the growth but in essence you want your money to double every 6 years and that is your path to financial freedom.

    I hope some of my vision was insightful.


  18. Permanent policies work like this.
    the cost for 1000 of term insurance at age 21 costs $0.09
    the cost for 1000 of term insurance at age 85 costs $950.00
    In a permanent policy At age 21 they say pay us 15.00 per 1000
    The first year they take all the money for commissions.
    If you die in the first year your heirs get 1000. A nice return on your 15 dollars.
    The second year you pay 15Dollars again. This time they take out the $0.10 for the insurance. they take out 1$ for a contract fee another $2 for other fees.
    So you have $11.90 in cash value. In a “whole life” policy they give you some money back in the form of a dividend if they overcharged you. So maybe you have $12.49 thats the 5% they are talking about in the article. Its not 5% on the 30$ you paid. The next year you pay $15 again. So you have $27.49, But its a little different. They are no longer insuring a full $1000, because if you die with cash value you don;t get to keep it, so they are only insuring $972.51. they take out the contract and other fees, and charge you $0.10 again. Even though you are older, and insurance should cost more, you are actually insuring less money. They then pay the dividend, or not, and your value inside keeps growing. The way these pays get “paid up” Is that when you are 85 instead of paying 950, you are paying 50 because the cash value is close enough to 1000 that the insurnace company will pay almost nothing if you pass. (you are paying yourself the insurance amount through cash value.) and the dividend can potentially pay for the $50 the life insurance now costs. The other permanent products typically have lower internal costs, because their return isn’t based on overcharging you. Instead, they invest the money in a fixed account (AKA we promise to pay 3% every year – which they accomplish by buying government bonds), an IUL which gives you the S&P 500 return with a cap (aka they say you can;t lose money which they guarantee with options, but can;t make more than 8-12% which they lock in with more options the cost of the options is paid for by the over performance), or a VUL policy where they basically just invest the cash value in mutual funds.

    Whats often not discussed is how the account performs when you pull money out. Every product works differently in this regard. Lets say you are 85, have $950 in cash value on 1000 worth of insurance. You take out $200.00. 2 things happen – 1. if you die without paying it back, your heirs only get $800. 2. The amount you pay for insurance increases. Because now instead of insuring 50.00 you are technically insuring $250.00, so what would have cost you 50.00 costs you $225.00. Some Universal life policies allow you to lower the death benefit. So you have 750 of cash value but only 800 in life insurance, so the charges remain the same.

    So why do it?
    1. If you die early on you get an amazing return, usually several 1000 times what you put in.
    2. If you want permanent insurance for your heirs you can put it outside of your estate in an ILIT. (but then you can;t take cash out. easily) and it won’t be counted as an asset in your estate. (say you are worth 14 million – the governments going to take a huge chunk. if you buy insurance outside your estate you can move the overage out and avoid estate taxes.)
    3. If the cost of insruance is lower than your tax rate it can be a good savings vehicle. Because of the tax benefits. but really consider a UL instead of a whole life plan.

    Hopefully that all made sense.


  19. My dad was 96 when I bought one of these contracts for him to own. In our case, grandpa is insuring the youngest grandchild who was 22 at the time, so the actual premium for insurance was very low. It is a paid-up policy, where all the premium was paid up-front, and the policy break even was less than two years (we passed that point 7 months ago). It guarantees a return of 2.6+% plus an added dividend of about 2%, a rate not guaranteed, but varies with performance. So far, the insurance company has met the mark for the first two + years. Since dad is living on his Social Security check in a nice one bedroom condo (he still drives his car), he pays no tax on the dividend. This is an AAA company, who also has given us the right to surrender at any time without penalty which was important when I pay out his estate. Yes, there were risks because of dad’s age, but we are past that now given the measly return in treasuries and bank CDs or savings accounts. Dad calls every August and says, “You’re not going to want to hear this, but I got my driver’s license extended on more time.” Go dad.


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