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

“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…

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“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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Joe Orost
Joe Orost
6 years ago

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.

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Daver
Daver
6 years ago

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 and family grew, and even to add coverage on my wife which would have been a great help had she passed away while our children still needed care since I was often traveling on business and their were no aunts. uncles, or grandparents to care for them. I kept that policy until early this year [I am over 65], because I think I no longer need it due to having built up other assets, and the going forward annual life insurance premiums would soon be rapidly eating away the accumulated cash value. The independent agent who sold me that policy was a very straight and candid person [who eventually became president of that company and others], so I went in with my eyes open and have no regrets.

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Chuck Hinners
6 years ago
Reply to  Daver

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
Stew
5 years ago
Reply to  Daver

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

SageNot
SageNot
6 years ago

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.

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vivian lewis
6 years ago

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 for Uncle to tax me but I did have to fill out paperwork for US taxes.) I paid the same amount every year since then.
The policy matured when I turned 65 and there had been a nice build-up from the mutual side. I paid modest taxes but did not in fact buy a pension for the money as I was not required to do so.
However, a mere 18 months later it turned out that the British mutual insurance company had falsified its accounts and so other NUJ reporters who had bought policies from the very same firm were wiped out. So besides reading books about investing in yourself and besides talking to an insurance broker who is a salesman, you should do what I didn’t do (partly because the English Channel was in the way): look into the rating of the insurance company you are dealing with. Many of the reporters were not covering business and finance but I already was when I bought the policy and paid not attention to the rating. My bad.
The US has an insurance system run by an outfit called A M Best.

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Chuck Hinners
6 years ago
Reply to  vivian lewis

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
Caulker
6 years ago

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.

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bj
bj
6 years ago
Reply to  Caulker

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!

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tbear
tbear
6 years ago
Reply to  bj

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.

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Bakermre
Bakermre
6 years ago

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
Teda
6 years ago