Explaining “770 Accounts” and Palm Beach’s “How to Fund Your Own Worry-Free, 100% Tax-Free Retirement.”

Reading into Tom Dyson's Palm Beach Letter pitch for “The Secret Investment Account: How to Fund Your Own Worry-Free, 100% Tax-Free Retirement.” This was originally pitched as the "770 Account" and has also been touted as a "702(j) Account" that "pays 30-40X more than bank accounts"

By Travis Johnson, Stock Gumshoe, April 3, 2018

This was originally published on June 3, 2013, and it continues to be one of the most-discussed topics we’ve covered during those years.

The idea continues to be teased and promoted actively by Tom Dyson and his folks at Palm Beach Letter, sometimes using different names, so we’re re-posting it for those new readers who might be interested… the idea is now sold partly as a secret strategy used by Warren Buffett, Joe Biden, Wall Street Bankers, and other notable names… but the basic idea and the type of “bank on yourself” life insurance policy they’re pitching is unchanged (yes, I expect Buffett probably has some whole life insurance, since essentially all wealthy people use life insurance as part of their estate tax planning, and Berkshire Hathaway has engaged in life settlements/secondary life insurance investments in the past).

While you’ll still sometimes see it teased as the 770 Account, or as the “World’s Most Notorious Asset,” it’s mostly now being teased as the “702(j) Account” (just another mysterious-sounding number, like 770, that refers to the part of the IRS code that deals with cash-value life insurance)…

…the story otherwise hasn’t changed much, here’s our original article…

—-from 6/3/13—-

“Imagine an account that…

“Lets you retire 100% tax-free

“Is NOT reportable to the IRS

“Pays you an average of 5% per year

“Has paid out, on average, for 121 straight years

Are you getting our free Daily Update
"reveal" emails? If not,
just click here...


“And which, unlike traditional retirement plans like IRAs and 401(k)s, lets you withdraw money anytime you like, for whatever reason you like, and with no penalties whatsoever.”

That’s what Tom Dyson and a few other folks who sign their promo letters are promising in the latest pitch for the Palm Beach Letter, which he publishes with Mark Ford. It’s all about an account that’s been used by the uber-wealthy for generations, and by “at least six different U.S. Presidents,” including John F. Kennedy and FDR, whose pictures grace some of the ads to provide gravitas, to generate “IRS-exempt” income for retirement.

So what’s the story? Well, Dyson calls it the “770 account” to make it seem mysterious (why else, of course, would you buy the newsletter?), but, frankly, it’s plenty mysterious on its own even if you don’t give it a sneaky name. More on that in a moment.

In fact, this kind of “Account” is already being touted by lots of skeezy-sounding infommercials and books whose promises make you very suspicious — they come with names like “Bank on Yourself” and “Infinite Banking.”

That’s not to say that any of the heavily marketed versions of these plans are skeezy, just that their promises give me that feeling, and the numbers and specifics for plans like this come usually only when you’re sitting in an office with an agent. “Skeezy”, by the way, is defined by your friendly neighborhood Gumshoe as a combination of “sketchy” and “sleazy.”

But what they’re talking about with those plans, and what Tom Dyson is pitching for his newsletter, is life insurance.

Not just ordinary term life insurance like most people under 60 carry, though — we’ll get to that in a minute. First, a bit more of his tantalizing teasing:

Manhattan’s Secret Vault: Why Wall St. has kept this powerful secret hidden from you

“There’s a very good reason you’ve never heard about the “770” account before:

“That’s because Wall Street doesn’t want you to know about it!

“And neither do the big banks too, for that matter. (More on this in a minute.)

“Now, even though this is the investment account The Wall Street Journal is on record as saying is better than 401(k)s and IRAs… the majority of Americans don’t know it exists.

“Why?

“Well here’s a clue…

“I just got off the phone with an insider who works in the 770 industry. This person has worked first-hand with one of America’s biggest financial gurus (a name you’d instantly recognize), as well as several employees from Goldman Sachs and other big investment banks.

“And this is what this person said to me: NO ONE in Wall Street has their money in stocks—many of them are invested instead in ‘770’ accounts!

“Now, consider what this means…

“Here are the same investment professionals who’ve been telling us for years to “buy stocks”… and meanwhile… they’re all putting their money somewhere else!

“Ridiculous.

“Can you imagine the outrage this would create if most people found out about this?

“That’s why you’ll never hear your broker mention this investment to you, no matter how much money he (or she) has parked into it.”

We get a lot more in Dyson’s ad about the safety of these plans, and about how the big banks have tons of their own capital tied up in these plans (that’s true, by the way — banks have massive life insurance assets called “bank owned life insurance” or BOLI, they take it out on their top employees and it’s a large portion of their core capital), and Dyson’s reiteration that he has been putting increasing amounts of his own family’s money (20% of his net worth) into these accounts and getting a safe 5.5% yield … and it’s money that he can take out whenever he wants to by borrowing against it without penalties.

So what he’s talking about is not just life insurance, but probably a specific class of permanent life insurance that’s called “whole life.”

And it’s not really life insurance, not in the way those of us with term life insurance policies think of it (making sure your family’s not destitute if you die when your kids are young, or your mortgage has 20 years to go), it’s more of a wealth protection and tax-avoidance savings policy.

Whole life insurance is an agreement between you and an insurance company that they will pay out a certain amount of money when you die, and the agreement never expires as long as you keep paying the premium. That obviously means the premium is far larger than with a term life insurance policy, since a term policy expires at some point — term life insurance almost never pays out, so it’s cheap. You can pay $25 a month for $500,000 of 20-year term life insurance if you’re 35 years old, which is obviously cheap, but that’s because you’re young and healthy and the insurance expires when you’re 55, well before you reach the highest mortality risk years.

Whole life insurance does have that insurance portion, in that if you die in the early years of the policy there’s a death benefit that probably exceeds the money you’ve put in. But it’s not really for that — it’s set up to accumulate your death benefit over time. So if you want a $500,000 policy and the actuaries think you’ll die in 35 years, your premiums plus whatever returns the insurance company can earn on those premiums will have to add up to $500,000 in that length of time, plus whatever the insurance company wants to make as a profit. Life insurance companies do not generally do crazy investing or earn great returns in times of low interest rates, and they know pretty precisely when their insured people will die (for a large group, on average) so your premiums would likely be pretty stiff.

But that’s if you’re thinking about it as insurance — much of your premium goes into building a cash value for the insurance policy, and if you buy your policy through a mutual insurance company (like State Farm, or many others) that’s owned by the policyholders, and you get a “participating” or dividend-paying policy (meaning you get a dividend from the insurance company when they make money), then your cash balance can compound nicely and provide what are effectively decent investment returns that are indeed tax-advantaged. I don’t know whether the 5.5% gain that Dyson is expecting is typical or not.

Life insurance is often used by families who have some wealth to pass some of that wealth down to the next generation without taxes, and it doesn’t have accumulation limits that I’m aware of, like tax-advantaged retirement plans that restrict the amount you can put in every year — for most people contribution limits are a theoretical concept, but for the upper middle class and the wealthy the cap of 25-50 thousand a year across various retirement accounts is a bother.

So the key aspects of this, from what I can tell, are that you would want to buy whole life insurance, that you would want to have a participating or dividend-paying policy, and maybe even, if Dyson is following the same track as folks like the “Bank on Yourself” people, that you want to maximize the amount of savings you put into the plan (these are often called “paid up additions”) to increase your potential dividends from the mutual company and the growth of the account over time. The maximizing and “be your own bank” stuff is all about putting so much of your net worth into these policies that you do all of your big purchases (like buying cars, etc.) by borrowing from your policy. But of course, to do that you have to be the kind of person who can put a substantial amount of money aside for these large premiums as your “forced savings” plan.

And the reason it’s confusing, even if you don’t call it a “770 Plan”, is that these are complex contracts, they’re not standardized across different insurance companies, and from what I can tell you can only really buy them through an agent, whose commission structure may drive him in a different direction than you want to go. There are many, many variations and riders on these policies that I have only seen briefly mentioned, and I don’t know how most of them work — I suspect that they’re difficult to compare across providers, which is a hallmark of most commission-driven, hidden fee businesses.

Life insurance has a reputation for being riddled with fees, and for permanent life insurance and whole life insurance like this, the articles I’ve read suggest that most of the policies start to make sense after 10-15 years, but they suck up substantial costs and fees that mean you might lose out if you needed to try to pull your money out before that. This is a small segment of the insurance business that’s focused mostly on the wealthy, and the stuff that Dyson seems to be talking about is probably better handled with agents who are specialists in this … preferably those who don’t also happen to market a skeezy “secret plan.”

That is an extremely non-expert view. I don’t have a policy like this and I have not researched them fully, I’m sure there are people with whole life plans and probably agents who sell these plans out there in the great Gumshoe readership who could probably explain it better (feel free to use our friendly little comment box below) — all I can tell you is that Dyson seems to be teasing participating/dividend-paying whole life plans as his “770 plans” (and no, I don’t know what the 770 refers to), and they are real, and I don’t know whether they’re a good idea for you or not.

P.S. As of November 2013 this is now also being teased as “The ‘Underground Wealth’ Account: How to Fund Your Own Worry-Free, 100% Tax-Free Retirement” — these “accounts” were pitched in a different Palm Beach Letter teaser ad that was mostly about silver, I covered that one here on November 7.


Irregulars Quick Take

Paid members get a quick summary of the stocks teased and our thoughts here. Join as a Stock Gumshoe Irregular today (already a member? Log in)

540
Share your thoughts...

avatar
161 Comment threads
379 Thread replies
0 Followers
 
Most reacted comment
Hottest comment thread
292 Comment authors
Matthewwhudelmaierwmhdallaslmbwebsail7 Recent comment authors

This site uses Akismet to reduce spam. Learn how your comment data is processed.

robert
Guest
robert

Anyone know why Mark Ford changed his name from XXX to Mark Ford? Is he hiding something from his past? What might he be running away from?
Curious minds would like to know.

Add a Topic
1696
Add a Topic
1696
Martin
Guest
Martin

From Mark Ford in the Palm Beach Letter about his name “Many years ago, I advised some of my protégés—Paul Hollingshead, Don Mahoney, and Katie Yeakle—to start a business. They came up with the idea of teaching copywriting, since Don and Paul had both learned to be A-level copywriters under my tutelage. They wanted the program to be based on my teachings. I agreed but told them that I didn’t want to be actively involved because I was very busy consulting and had no time to get involved. They said okay, but they still wanted to use my story. I… Read More »

Add a Topic
1696
Add a Topic
370
Add a Topic
5916
Roger Bond
Guest

Back in the day of ETR they did try to keep the Mark Ford thing “secret”.
I remember one conference video where a speaker would refer to “Mark” and “Michael Masterson” would lean in and say “Michael”, “It’s Michael”.

It’s not like there was any dirty laundry associated with the name Mark Ford, but they seemed to try to keep the pen name alive as best they could for the duration.

Roger.

Add a Topic
1696
Add a Topic
1697
Add a Topic
1696
Catharine McCasland
Guest

Michael is his pin name for writing books.

Glenn
Guest
Glenn

It’s “pen name”, also known as a “pseudonym, a “stage name”, a “nom de plume”, an “alias”, an “assumed name”, etc.; there’s no such thing as a “pin name”.

Jim
Guest
Jim

You know what she meant. You didn’t have to rub it in.

Group One
Guest
Group One

In the more advanced cultures where fabrication is the rule, the term is indeed “pin name.”

Robert
Guest
Robert

Back to the Life Insurance, or “770” account as you/Tom Dyson describe it. What you are referring to (I believe) is called an “Indexed Universal Life Insurance” policy. If written correctly, it is a “contractual” agreement between you and the Insurance Co to pay a death benefit when you die. But, there are certain benefits and disadvantages. First, only “buy” one of these if you have plenty of disposable income, i.e. you can pay the premiums and then wait for 15-20 years before you begin to withdraw funds. Having said that, I purchased one of these and this is the… Read More »

Add a Topic
1208
Add a Topic
882
Add a Topic
3770
Montrose McCoy
Guest
Montrose McCoy

That’s a helluva deal you got, if true. You can’t find anything remotely that good anymore in today’s interest rate environment. I’d recommend Pamela Yellen “Bank on Yourself” rather than Nash. However, she doesn’t tell you her favorite carrier because it’s her trade secret, as an agent, although I can say it isn’t an indexed product.

Add a Topic
4479
Add a Topic
5978
Harold
Guest
Harold

Using a whole life policy with paid-up additions, you can start taking loans as soon as there is cash value in the account. The current rate of return for whole life is equivalent to buying term insurance and investing the difference in a taxable mutual fund returning over 10% pre-tax.

Add a Topic
882
Fred
Guest
Fred

This comes under the caption of “There is no free lunch”. The life insurance companies are not dummies. Interest is charged on the loan from the cash value of standard whole life policies. The loans also reduce the face amount of the policy. The interest rate on my whole life cash value is 8%

Add a Topic
5916
Add a Topic
1208
Add a Topic
882
David A
Guest
David A

Check the wording here. “You can start taking loans?” Loans? Its YOUR MONEY! Why should the insurance company charge YOU money in a form of a LOAN for using YOUR money? Not much logic here. NEVER use Life insurance as an investment. Buy Term and Invest difference in an IRA.

Add a Topic
882
Add a Topic
1208
Add a Topic
882
Brett
Guest
Brett

David…If you are paying 8% on a loan on your policy and it affects your cash value and death benefit you insured yourself through the wrong company.

Larry S
Guest
Larry S

So I agree with the 770 plan which is part of the IRS 770 code. I have one of these programs of insurance too. I just got my 14.5% payment today on about 5700.00 sweet. I also am older and Life insurance takes more of my money then I would like. But a 250,000 dollar policy with additional paid up premiums and 14.5% capped is not bad. The loan interest rate is 4% and although the money from the loan does not come out of your money, your money still grows at the capped amount each year. So unlike a… Read More »

Add a Topic
882
Add a Topic
1208
Add a Topic
882
marty
Guest
marty

In the “whole life” environment, I assume that you are depleting the cash value of your whole life policy when making withdrawals or loans. The explanation of the Universal Life policy was that you are depleting the face value of your death benefit.
I’m assuming that is the difference in the whole life & universal life. You also mentioned buying term and investing the difference. In a whole life policy, the insurance company sets a cash value accumulation, but “investing the difference” is a whole different deal.

Add a Topic
882
MJ
Guest
MJ

I had an account and was charged interest on my own money. I was told that if I borrowed from it, I would pay 5% interest and3% of the 5% would be returned to my account. Bulls**t.!!!! Travelers took my interest and kept it. Liars All. Said I did not read the fine print. Mistake I made was in believing the lying SOB who was my agent. ALL these agencies lie and take your money. No exceptions. NO FREE LUNCH.

Add a Topic
372
Steve
Guest
Steve

I’d like to know a Mutual company paying with an equivalent 10% return. I don’t think in this environment there is any. On loans you are not borrowing your own cash out of the policy on an Indexed policy you are borrowing it from the company. There is a collateral assignment against the contract. While this may sound the same it is not. The loan does not have to be paid back. Also, what is in your account continues to earn whatever the return in the market was. Say the market made 10% and the interest rate was 5%. You… Read More »

amagi
Guest
amagi

Please people, there is a huge difference between ‘principle’ and ‘principal’.
Use the correct word.

Jim Smith
Guest

amagi
Where did you see the mis-spelling and mis-usage? Carefully scanned but could not
find.

Andy
Guest
Andy

Misusage was here:
Robert says: (September 1, 2013 at 12:25 pm)
“Back to the Life Insurance, or “770″ account as you/Tom Dyson describe it. …
1. Guaranteed no loss of principle (see following)”

Add a Topic
1208
Add a Topic
882
DRAXX
Guest
DRAXX

mentioned twice here: Robert says: September 1, 2013 at 12:25 pm Back to the Life Insurance, or “770″ account as you/Tom Dyson describe it. What you are referring to (I believe) is called an “Indexed Universal Life Insurance” policy. If written correctly, it is a “contractual” agreement between you and the Insurance Co to pay a death benefit when you die. But, there are certain benefits and disadvantages. First, only “buy” one of these if you have plenty of disposable income, i.e. you can pay the premiums and then wait for 15-20 years before you begin to withdraw funds. Having… Read More »

Add a Topic
1208
Add a Topic
882
Add a Topic
1208
mark
Guest
mark

Anyone who doesn’t know the difference between “principal” (correct usage in this context) and “principle” should consult an independent financial adviser before investing in a plan of this type (and probably before investing in anything else).

Jean
Guest
Jean

Just remember, the principal is my “pal!”

ricky7
Member
👍1
ricky7

It’s there. I noticed it too.

onnie walker
Guest

ikky picky

Bill
Guest
Bill

And…principally unprincipled prisses motivated predominantly by pomposity.

Bill
Guest
Bill

It’s a basic principle of investing that you shouldn’t lose your principal.

marty
Guest
marty

I agree, it’s “ikky picky”. That being said, a person can still get the exact message. However, that may not be the case with certain other words when this happens. It could change the entire point of the message.
Bill; he still has the best reply (at this point, anyway).

marty
Guest
marty

I’ve spent all this time basically educating myself on the principle of investing and now the principal is leaving my institutionalized integrity. What?

Lee
Guest
Lee

I am wondering if my insurance wl I should keep it as I since got it have been
diagnosed with diabetes. I am not sure what the consequences would be to
cancel wl and replace with term. Would I still qualify for term ins.
Thank you

Add a Topic
882
Add a Topic
4154
Tom
Guest
Tom

Lee, If you have diabetes and already have a WL policy, you would be foolish to cancel it and get term. The term would be more expensive because of your diabetes and depending on the severity of your condition, you may not qualify. This is one of the advantages of WL insurance – once you have it, the policy is guaranteed for life as long as you make your premium payments. Don’t let ANYONE tell you otherwise. Keep what you have my friend!

Add a Topic
4154
Add a Topic
4154
Add a Topic
882
Kerry Wallingford
Guest

Never cancel a life insurance policy until a policy has been placed in force to replace it if you have any health condition. Diabetes is a condition which will cause an insurance carrier to increase the rating on a new policy as the risk they bear is higher. As it relates to this concept; if the policy is designed properly you can still take advantage of this “tax free retirement” tool. Both Whole Life Insurance and Index Universal life insurance are popular to use in this concept. The reason is that by borrowing “against” the policy to access capital it… Read More »

Add a Topic
1208
Add a Topic
882
Add a Topic
4154
Rich M
Guest
Rich M

You don’t borrow again the “life insurance death benefit” only the cash value. Index UL and INDEX WL are very different too. Also cost of insurance continues is deducted even if the index makes 0%, the minimum 3% is average annual but if you have a few good index years you may have no interest added during a particular index term when the ends up at 0% if it averaged higher than the 3% up to that point. Insurance policies used to be great safe savings accounts but not so much anymore, because of the low interest rate environment couple… Read More »

Add a Topic
1208
Add a Topic
882
Add a Topic
882
marty
Guest
marty

So what you are saying is that all these “tax free loans” will have to be paid back somewhere along the line? We need some feedback from all these experts on this site.

Harold
Guest
Harold

Policy loans do not have to be repaid. They can be used to annuitize the policy. A financial blog is a terrible place to get reliable information about insurance. I have seen many incorrect statements in this thread. Go to agents from the top companies and ask about a whole life policy with maximum paid up additions. This will cut the agent’s commission about in half and will boost growth–if the agent balks, talk to another agent. A whole life policy can easily have a rate of return on the face value in the high teens (as a taxable equivalent… Read More »

Add a Topic
882
Jeanne Wimbley
Guest
Jeanne Wimbley

Hello, I borrowed $1.500. from my whole Life term policy as my spouse lay dying from cancer ” which deluded him “Bills, included his insurances, a Gas, electric bills of $1500.and growing was PAID”. His delusions kept me destitute–and grown kids financially supported me until he died. Traumatized, I failed to re-pay that loan on my policy- returned to haunt me . 1. My policy was dropped and the death benefit gone. 2. Worse–the entire amount of the policy was ADDED to my TAX as if INCOME EARNED–and I was FORCED to pay Taxes on that sum. 3. My mistake… Read More »

Add a Topic
3397
Add a Topic
996
Add a Topic
372
Nate
Guest
Nate

Not sure if you are being deceptive, or you’ve been deceived, but I can’t begin to describe how little of the real story has been told in your above post. IULI, while not a scam, is one of the worst deals in all of the insurance industry. And it is unquestionably the least transparent. While you are mostly correct in your basic synopsis of the policy structure, you left out most of the caveats. 1. Let’s start with the big one. THERE’S ABSOLUTELY NO GUARANTEE THAT YOU CAN’T LOSE MONEY! While it’s true that you can’t lose money due to… Read More »

Add a Topic
882
Add a Topic
882
Add a Topic
882
Malcolm Jensen
Guest
Malcolm Jensen

Note, you know about half as much as you think you do. There are many mistakes in your essay. Just a quickie – SEC and FINRA (formerly National Association of Security Dealers) have been fighting for requiring those who sell fixed-indexed annuities to be securities licensed so the security dealers can control the market instead of having to compete against it. It was NASD (now FINRA), led by Mary Shapiro, who was fighting for this non-sense notion that FIXED-indexed annuities are securities. When she went to the SEC, the SEC began the same fight. Congress rightly outlawed their self-serving effort.… R