by Travis Johnson, Stock Gumshoe | March 18, 2014 3:51 pm
“Outlawed in Amsterdam in 1598… Banned in France in 1681… Now only available in America and Canada[1]…
“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[2] for his Palm Beach Letter[3] — 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[4] savings strategies … though I imagine there are ways to learn about Mark Ford[5] 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[6], is well known for non-stock investments and talks a lot about safety and cash flow with things like rental real estate[7], 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[8]…
Are you getting our free Daily Update
"reveal" emails? If not,
just click here...“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[9]” or the “President’s Account”: Life Insurance[10].
Not just any type of life insurance[11], but the “old” kind of life insurance with a twist — he’s not talking about indexed life insurance accounts or annuities[12], 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[13] 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[14]” or “infinite banking[15],” 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[16] by Pamela Yellen[17], Becoming Your Own Banker: Unlock the Infinite Banking Concept[18] by R. Nelson Nash[19], and Financial Independence in the 21st Century[20] 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[21] and Pamela Yellen’s “Bank on Yourself” site is here[22], 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[23] 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!
Source URL: https://www.stockgumshoe.com/reviews/palm-beach-letter/what-is-palm-beachs-untouchable-income-account/
Copyright ©2024 Stock Gumshoe unless otherwise noted.
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.
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.
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
How much did you put in (premium payments, etc.) versus its cash value.
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.
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.
Thanks Vivian, good point — there are a half dozen or so big mutual insurance companies, I assume they’re all pretty highly rated by AM Best but definitely important to check, this is a product where you count on a company continuing to be steady for decades.
I’d enjoy researching this stuff much more if there was more transparency and standardized language across insurers… and, of course, if it wasn’t all run through insurance agents who are, I imagine, as varied in competence and trustworthiness as are stockbrokers and financial advisors. I find the lack of do-it-yourself options in insurance frustrating, but I suppose there are good reasons for that to at least some degree.
Interesting (and brief) article from Kiplinger’s here about some of the mutual biggies — from 2011, but pretty relevant.
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
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.
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!
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.
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.”
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 component.
Example: Purchase a $100K whole life policy with PUA rider in combination with a $400K renewable one-year term rider, which immediately provides $500K of coverage. Dividends buy paid-up additions and build cash value, then help offset the gradually increasing term-life premiums if you want to keep them level. I have this arrangement, and still get dividend checks every year (because I like to get them!), but I could also use them for more PUAs or cash value if I wanted to.
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 laws. If you go to Florida, which is like the Wild West of insurance (there is no state guarantee fund that makes sure the insurance companies that do business have enough cash to back up their liabilities), I am sure you can get it – just stick with a major insurance company. People also do this type of savings with annuities to put their cash someplace to look “cash poor” to qualify for medicaid for a nursing home or for college financial aid. Got it?
Buying term and investing the rest is good, if you don’t lose your investment (and you remember to invest). A Whole Life Policy is a forced savings plan too. Also, term insurance gets very expensive as you get older. For insurance, a guaranteed Universal Life policy with minimum cash value could be a best bet.
You should not buy insurance for an investment, you should buy it because you love your family.
This week, Mr. Market likes WU.
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
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!
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.
.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.
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 money in your policy doesn’t go down in value… even if the stock market crashes 50%.
• This strategy will pay you income every year, tax-free.
• There is a minimum guaranteed return.
• You don’t have to mention this investment on your tax return, so the IRS never knows about it.
• You can start with as little as $50-100 per month (depending on your age).
• Using certain strategies, it’s possible to withdraw money—tax-free—with no penalties.
• It provides complete protection against creditors in most states. The money you invest is safe from all lawsuits and court orders.
• Best of all, you can use your investment as collateral to buy investment real estate, start a small business, or even purchase cars and other goods. You may not have to use expensive debt financing ever again.
– For older people: Provide unique way to combine a dividend-paying whole life insurance policy with a reverse mortgage to generate extra retirement income AND avoid the anxiety of spending down your retirement nest egg…
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?
I don’t know what this is about, but would just chime in that it’s worth being very careful and looking at all the variables in these kinds of financial engineering deals — Whole Life insurance and reverse mortgages are both relatively poorly understood by individuals (including me), which means it’s harder to see the pitfalls and possible downside … and they’re also often sold by agents on commission, with commission, closing and other fees often not clear to the individual.
Not to say it can’t work, of course, but stacking two types of products that work somewhat like “black boxes” for individual investors/homeowners (you put money in and expect money out, but the inner mechanics and costs are not necessarily comparable across firms or visible) means there are then two ways that investors can be disadvantaged.
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.
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.
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?
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.
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.)
Also known as, or similar to, asset-based life insurance.
Is any of this applicable to Canadians? Is there something similar to “infinite banking” for us?
Whole Life Insurance is sold in Canada, and the ad cites it as something that’s available in both the US and Canada (but nowhere else), and I’ve seen it marketed to Canadians … but presumably there are differences in the regulatory framework and in the tax consequences, among other things. I don’t know what the differences might be.
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).
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.
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.
http://congerblog.wordpress.com/2013/05/15/why-i-dont-bank-on-yourself-and-you-shouldnt-either/
Quick search on the internet Michael also results in
http://www.mcguirefinancial.ca/infinite-banking
Hi,
How can a UK investor (or non USA / Canada Citizens) receive benefits form this account please?
Thanks
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
I don’t know much about UK life insurance specifically, there is obviously life insurance in the UK and it also carries some tax advantages just like it does in the US, but they aren’t identical and I’m not much of an expert on the specifics.
I also don’t know if UK life insurance companies are mutual, or if they pay dividends to policyholders, which, when compounded, help create the long-term growth potential of the “bank on yourself” system that looks so appealing to some folks in a low-interest-rate environment.
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 vehicle. I used to market one from MetLife through a Citigroup subsidiary that had some neat bells and whistles.