What is Palm Beach’s “Untouchable Income Account?”

Looking at Tom Dyson's pitch for PBL Wealth Builders Club

By Travis Johnson, Stock Gumshoe, March 18, 2014

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“Outlawed in Amsterdam in 1598… Banned in France in 1681… Now only available in America and Canada…

“The ‘Untouchable Income Account’ that can safely multiply wealth 468%—without risking your money in the market
Set it up the way I’ll show you, and you can access the funds anytime, without penalty…

“But the IRS can’t take a penny… The government can’t touch it… And if you get sued or owe money to a creditor, in most cases no bank, or lawyer, or gov’t agency can seize the money in this account…

“Just 1 in 1,500 Americans know about this secret (legal) account…

“Here, your dollars grow tax-free…”

That’s the intro to the latest ad from Tom Dyson for his Palm Beach Letter — this time around, he’s pitching the idea of an “Untouchable Income Account” as one special report you’ll receive when you sign up for the Palm Beach Wealth Builders Club, which styles itself as more of a “get rich and live a wealthy life” advisory than as just a stock picking rag … which I think is probably admirable, and they may well provide lots of guidance and hand-holding to get folks to change the way they think about wealth and savings and generating cash flow aside from the basic retirement savings strategies … though I imagine there are ways to learn about Mark Ford and Tom Dyson’s strategies without separating yourself from $1,250.

We won’t get into all the detail on what the “Wealth Builders Club” might tell you — Mark Ford, who is the papa bear at Palm Beach and a copywriting mentor to folks like Porter Stansberry, is well known for non-stock investments and talks a lot about safety and cash flow with things like rental real estate, freelance work and other small scale business opportunties, etc… basically, thinking about building the business of you and increasing your cash flow rather than just saving and investing.

But the teaser pitch that’s getting everyone’s attention is this “Untouchable Income Account” … so what is it?

Well, we can give you a little taste of the spiel:

“This may be the weirdest ‘investment’ you ever see…

“But it could let you retire, tax-free…

“I’ve put more money into this than any investment in my life. By the time I’m finished, I will have invested more than $2.8 million.

“Why?

“Because it’s projected to create an estimated $11.8 million in my lifetime.

“Set it up the way I did, and every $100 you invest could return $468… Every $1,000 could return $4,679… Every $10,000 could return $46,788.

“That’s what I’ve set myself up to receive.

“But let me be clear. These results won’t come overnight. They won’t even come in a year.

“Instead, your gains will build safely and steadily, year after year. They take time. But they will come. Just as surely as mine do now.”

That sounds kind of appealing, right? Maybe not if you’re 75 and aren’t planning for returns that take a long time to build, but a steady sheltered growth is what most investors are looking for from their retirement accounts, so something that could provide that without scaring you silly (like the stock market does to some folks) catches attention.

And it’s not one of your typical investments, as you gathered:

“It has nothing to do with stocks…

“Bonds…

“Options…

“Metals…

“Or commodities of any sort….

“This is a true ‘set-it-and-forget-it’ wealth accumulation tool. One you only need to maintain once per year. All you need to do is make one annual payment to keep your account active. And it will always be working in the background. Slowly at first, but surely, increasing your wealth.

“The French banned this account in 1681. Not because it’s dangerous or immoral. But because—as the New York Times reported—they feared it would make people so financially safe and secure, they would never work again.

“As a matter of fact, this account is safer than your 401(k). And it’s safer than any retirement plan you’re currently part of…

“There’s a simple reason for that. It’s because—unlike a 401(k) or pension fund—the money you make with this account does not depend on the performance of the stock market.”

So what is it?

Well, turns out that what they’re now touting as the “Untouchable Income Account” is … pretty much exactly what they were touting a few months back as the “Secret 770 Account” or the “President’s Account”: Life Insurance.

Not just any type of life insurance, but the “old” kind of life insurance with a twist — he’s not talking about indexed life insurance accounts or annuities, or accounts that are tied to market performance, or even about the plain jane inexpensive term life insurance that many people use to protect their families from the premature death of a breadwinner. This is participating (dividend-paying) whole life insurance or permanent life insurance, bought from a mutual insurance company, and the twist Dyson has been talking about on that kind of account is, in part, the addition of a “paid up additions” rider to maximize the cash you put into the account and how much it can grow and compound with dividends from the mutual insurance company, and minimize the actual “death benefit” part of the insurance contract.

The “participating” part means that you should have insurance that participates in the profit of the company — that’s why you’d want a mutual insurance company that’s owned by policyholders instead of a publicly traded, investor-owned insurance company. Dyson’s expectation the last time he pitched this was for annual earnings in the range of 5% based in part on this “participation” … and the earnings compound for a long time, and are tax-sheltered and have estate planning benefits and creditor protection benefits of some sort.

The “paid up additions” rider means you put in more cash than would be required to maintain your death benefit — so in fact you’re turning it into much more of a savings vehicle instead of just life insurance.

This time around, Dyson doesn’t as aggressively push the idea as being a way to finance your life — borrowing at low cost from the account to buy your car, or send your kids to college, or finance your business, but that was a pretty big part of the last spiel.

Essentially what Dyson is talking about in combining this whole life insurance with the paid up additions rider and then also using the cash built in your account as a source for loans (that you would pay back to yourself) is what has been promoted in self-help finance books as “bank on yourself” or “infinite banking,” something which did enjoy a new spurt of interest starting in 2008 when folks started fearing the banks again (or were just angry at the banks).

My understanding of this kind of account is that it’s more suitable the longer you have to let it grow, the higher your tax bracket, and the more disciplined you are. Long-term whole life insurance contracts that build in cash value can easily fail to reach “break even” for their owners in the first decade of ownership, they are not to be entered into lightly by folks who think they might not be able to make the premium payments in a few years, and borrowing from yourself is still borrowing — you have to pay it back, or there are consequences.

Other than that, I’d read up on a couple of the long-standing books in this area before ponying up for a newsletter subscription — it might be that Dyson’s group has identified particularly useful brokers for this technique or has better specific advice, but if you don’t know the basics and the terminology before going in you’ll have a harder time understanding who’s misleading you.

A couple of the books that are most often cited are The Bank On Yourself Revolution: Fire Your Banker, Bypass Wall Street, and Take Control of Your Own Financial Future by Pamela Yellen, Becoming Your Own Banker: Unlock the Infinite Banking Concept by R. Nelson Nash, and Financial Independence in the 21st Century by Dwayne and Suzanne Burnell. Each would set you back $10-20, and they may be in your local library.

And, of course, most of the big proponents of this kind of financial program have their own websites, their own acolytes, and often their own teams of affiliated financial planners or insurance vendors — R. Nelson Nash’s “Infinite Banking” site is here and Pamela Yellen’s “Bank on Yourself” site is here, if you want to start browsing around two of the leading “brands” in this concept. I don’t know what the differences might be, but my impression is that the nuts and bolts of the two are pretty much identical.

If you read one or two of those books and learn up on the concept with a critical eye, you’ll probably understand the ideas as well as you would from Dyson’s report — there’s no magic to life insurance, though for those who thirst for guarantees and who are still smarting from the volatile stock market of the last 15 years the idea of stability can seem sometimes magical.

You’ll probably end up with questions if you read up on all of that — if you’re moving forward with the idea and decide to speak to a life insurance salesman who’s ready to explain this kind of account to you or sell you such a contract, make sure you pay close attention to the difference between the possible returns they lay out for you and the guaranteed returns that the contract promises, and learn as much as you can up front about what happens if you miss a payment, what happens if you cancel the contract, what happens if you borrow, what the dividends from the mutual insurance company are likely if interest rates remain very low, or if interest rates climb dramatically.

That’s about the extent of my knowledge of this particular kind of insurance, which you will probably realize means I know almost nothing about the life insurance business. I’m far from being an expert on any of this stuff but Gumshoe readers are asking about “Untouchable Income Accounts” so, well, that’s your answer … looks like they’re the same thing as “Secret 770 Accounts.” We had a long string of discussion about the “Secret 770 Accounts” here if you’re interested in chiming in, including plenty of opinion shared by both proponents and opponents of whole life insurance and the whole “bank on yourself” or “infinite banking” concept … or you can start some new chatter with the comment box below. Enjoy!


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38 Comments on "What is Palm Beach’s “Untouchable Income Account?”"

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Joe Orost
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Joe Orost
March 18, 2014 4:20 pm

Thanks! I was thinking this was related to Untouchable Assets in the Cook Islands (http://mobile.nytimes.com/2013/12/15/business/international/paradise-of-untouchable-assets.html). Thanks for clearing this up!

BTW, Suze Orman says the only life insurance you should buy is Term.

Daver
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0
Daver
March 18, 2014 4:32 pm
I used this type of life insurance policy during the approximately 25 years period in my life in which my job provided the the sole source of income my family. As you explained, this type of policy allowed me to pay in cash above the amount required to cover the cost of life insurance, which I utilized to build up a cash account that commonly paid an interest rate over 5%. That was possible due to the influence of the insurance industry on Congress and USA tax laws. Riders on that policy enabled me to add insurance as my income… Read more »
Chuck Hinners
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0
March 18, 2014 8:28 pm

Universal life and whole life can BOTH be designed with heavy cash accumulation. Whole life generally offers a less volatile and slightly higher interest rate. One leading carrier currently offers 5.6% on WL and 5.05 on UL. The commissions on UL can be cut to as low as 3% of the annual premium with the UL as opposed to 15 to 30 percent for the WL version

Stew
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Stew
October 28, 2014 12:51 pm

How much did you put in (premium payments, etc.) versus its cash value.

SageNot
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SageNot
March 18, 2014 4:35 pm

Yep, old fashioned whole life with pd dividends reinvested. Why Dyson says that Universal Insurance c/b used mystifies me. The cash build up falls quite short for this t/b considered a
770 account. Plus the premium with Universal Life rises to the moon just to keep you insured, w/life95 limit.

vivian lewis
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0
March 18, 2014 4:43 pm
When I first moved to Paris in 1966 I bought a whole life insurance policy with an age-65 pension payout from a mutual life insurance company in Britain. I bought it through the journalists’ union in Britain I belonged to, the NUJ. It was affordable to a young mother doing odd jobs like teaching English or writing articles for The Economist for a retainer of GBP 7/per week (when the pound was $2.80). I used some of my earnings to buy the policy which was tax advantaged under French rules. (I was a French taxpayer then; I didn’t make enough… Read more »
Chuck Hinners
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0
March 18, 2014 8:34 pm

Travis
One should always ask the agent to disclose his or her commission since if the commission is minimized, the savings goes right into the buyer’s cash value. Agents will resist this disclosure in most states, even NY where disclosure is mandatory

Caulker
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Caulker
March 18, 2014 5:55 pm

I bought my first permanent life insurance at 18 from my NWL Ins. agent and have no regrets. Most people have trouble saving so this is a wonderful way to save tax free besides earning dividends every year, even in bad years. One can also borrow this money for any use but this can slow down you cash value growth. I heartily recommend the Palm Beach people and their products.

bj
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0
March 18, 2014 7:09 pm

When you reach a certain age your “savings” go to pay the ever increasing (with age) life insurance premium. So, as soon as you don’t need Life Insurance, cancel the policy and get those savings out before they’re ALL GONE!

tbear
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tbear
March 19, 2014 5:07 pm
If your premium is going up you bought the wrong type of policy. I have had one of these types of policies for almost 40 years and it hasn’t gone up a dime. Another one I don’t pay any premium and both the cash value and paid up life insurance increases each year. Premium’s are paid by the dividends. Since it is tax deferred and possibly no tax, if I die first, it is a good component of a long term financial plan. But you have to buy and structure the policy correctly to gain the benefits.
Bakermre
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Bakermre
March 18, 2014 6:00 pm

The worst part of this promotion is you have to listen for nearly an hour to these endless words that lead you on and on. Tiresome at best, frustrating for sure! All ending with “You want to buy a dog? Only $XXX with a money back guarantee.”

Teda
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Teda
March 18, 2014 7:19 pm
There’s another way to do this that reduces the premium and also increases the death benefit if that’s important and if the insurance company offers the option. It’s a combination of participating whole-life with a PUA rider combined with a renewable one-year term rider with a larger death benefit. Typically, an increasing percentage of the dividends and/or cash value are used to offset the gradually increasing premiums for the renewable one-year term rider in order to keep the premiums level, but if level premiums are not a priority, then you simply pay a little more each year for the term… Read more »
eugene11803
Irregular
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eugene11803
March 18, 2014 8:15 pm
These guys are better writers that financial advisers. In NY, there are limits on how “cash rich” your insurance policy can be or everyone would hide their cash there. Imagine the business owner with a cash business – he could put his money in this policy with tax deferred dividends that would not get reported to the IRS. He could also borrow out his money out at any time – tax free! And if he died, his family would get the death benefit tax free!!!! It is not so simple, but then again, NYS has some of the toughest insurance… Read more »
Randyman
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Randyman
March 18, 2014 9:17 pm

I like to keep it simple, Term policy, invest the difference in 401 using tips from the Gumshoe family and dividend paying utilities. If you pick a couple different utilities whose dividend is paid on a different quarterly cycle you can expect to get a dividend check every month after you retire, if your not already doing that of course. As a new investor, i think i may be singing to the choir.
Thanks for listening

joshsorensen
Member
0
March 18, 2014 11:38 pm

Randy – As an Independent Insurance Agent, kudos to you. A 770 account is a horrible idea for 99.9% of people. As I say, keep your insurance as insurance and your investments as investments. DO NOT MIX!

mwojnaro
Irregular
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mwojnaro
March 19, 2014 10:12 am

Great response Josh. Buy term and invest the difference was what I was told by a reputable agent. Followed his advice and am happy I did so.

Charles Dykman
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0
March 19, 2014 12:44 am

.The State of Wisconsin sells life insurance, but the insurance companies have kept the amount limited to maybe $15,000 or $20,000. But any type of policy is the least expensive by far. Perhaps you have to be a Wisconsin resident to buy it. Maybe other states sell insurance too.

Frenchy
Irregular
566
Frenchy
March 19, 2014 8:38 am
I happen to belong to the Palm Beach Letter and have received several of their 770 account emails. As Travis has pointed out, the PBL is more about wealth building than buying stocks etc… They are a conservative bunch and their picks and ideals have merit. I’ve cut and pasted of few things from them. They highly stress that the dividend paying whole life should be set up by a professional and most agents have no clue how to set it up properly. These policies provide many benefits: • With this strategy, there is no risk of principal loss. The… Read more »
Michele R.
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Michele R.
March 26, 2014 10:30 am

Interesting concept on combining a whole life policy with a reverse mortgage to generate income. How does this work for a 61 year old who takes out a WL dividend-paying policy, then a reverse mortgage once eligible? Do you mean that funds from the reverse mortgage should be used to pay for the WL policy? How soon would the person be able to collect dividends? Can you explain the advantages of this strategy over collecting dividends on stocks?

Virginia Scanlan
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Virginia Scanlan
March 19, 2014 10:38 am

We made the mistake of buying a lot of term as our kids were growing up and letting our whole life policy’s dividends pay premiums after the first decade of ownership. Once you turn 65, term becomes extremely expensive, if you still need insurance. We do. Wish we had paid for less term and continued to pay the whole life premiums. You never know what the future holds. Since our life insurance needs will remain permanent, we now will resume paying premiums on the WL at this late date.

arch1
Irregular
5283
March 19, 2014 10:52 am

I do not wish to dis-agree with what anyone has said about insurance. There is one more factor for you to consider however. A$ now does not buy what a $ in 1960 did. Our beloved Leaders in Govt. & their minions periodically harvest your accumulated wealth through devaluing the $ by printing more of them. The actions of the federal reserve will have an effect soon & feel already. Have you noticed price increases @ the grocery market?
Dollar is buying less,not cost of farming going up.

Frenchy
Irregular
566
Frenchy
March 19, 2014 12:05 pm

You are right Frank but something like this would keep you a tad bit ahead of inflation with 5%. Obviously this Whole Life strategy still needs to be augmented with stocks and other financial vehicles… But with 2 1/2 more years of Obama left who knows?

arch1
Irregular
5283
March 19, 2014 1:06 pm

Far be it from me to suggest that our Beloved Leaders are cooking the books as regards inflation so as to report little or none. My personal inflation rate/living costs seems to be closer to 10% than to 5%. To me this is what counts.

Marvin
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Marvin
June 14, 2015 1:05 am

40% of the cost of food at the grocery store is transportation costs. Because of the American farmer the US consumer has the cheapest, safest, widest variety and most abundant food on the planet. And, sorry to disappoint you, but the cost of farming ALWAYS goes up! (My people have been farmers in Iowa since 1850.)

Compwise
Guest
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Compwise
March 19, 2014 1:03 pm

Also known as, or similar to, asset-based life insurance.

barksducks
Member
14
barksducks
March 19, 2014 1:47 pm

Is any of this applicable to Canadians? Is there something similar to “infinite banking” for us?

Tim
Guest
0
March 28, 2014 3:44 pm

Michael, Actually yes. There is a Life Insurance person here in Canada that uses Life Insurance from Sunlife Financial, (a few others that I cannot think of).

Frenchy
Guest
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Frenchy
March 20, 2014 2:41 am

Micheal,
Being a Palm Beach subscriber, I do know that type of insurance is available in Canada. They also have identified (1) POC as well if I recall. Based on integrity to the PBL and obvious security reasons. I can not divulge that person’s info. Obviously, the above aforementioned by Travis does apply I am sure.

mark
Guest
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mark
March 22, 2014 2:46 pm

Can someone explain how they are saying you can get a return of 468%, I am wondering how you can get this if you are paying large premiums every year. Secondly, I have read this article a few times and still cant figure out what they are talking about and I am not a novice investor, any input is appreciated.

Frank Masterchild
Guest
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Frank Masterchild
March 23, 2014 11:45 am
Tim
Guest
0
March 28, 2014 5:00 pm

Quick search on the internet Michael also results in
http://www.mcguirefinancial.ca/infinite-banking

Abhijit
Guest
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Abhijit
January 7, 2015 9:19 am

Hi,
How can a UK investor (or non USA / Canada Citizens) receive benefits form this account please?

Thanks

SoGiAm
Irregular
4893
January 7, 2015 11:02 am

Abhijit-I’m glad you asked. Travis and others here regularly discuss non-US equities on this site. Stockgumshoe.com is rich with information for citizens regardless of nationality. Another avenue is to consider opening an Interactive Broker or similar account.
Best – Benjamin

Jon
Guest
0
Jon
June 16, 2015 6:10 pm
In general, middle-class Americans are best off with level term policies rather than universal life or whole life policies because they can get the highest death benefit for the lowest premiums. Term is pure insurance, whereas whole life is typically used as an estate planning vehicle more than for the face amount of the policy’s death benefit. If anyone is seriously considering this, there are a number of very attractive variable annuities out there that are viable alternatives and offer some pretty fantastic features, such as increasing death benefits as time goes by and somewhat self-directed asset allocation within the… Read more »
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