Chris Miles – Financial Independence Secrets of the Wealthy
Bill Fairman (00:03):
Hi everyone! Bill Fairman, Wendy Sweet here, thank you so much for plugging into our show this week. So in a previous episode we had discussed tax advantage, ways to invest in real estate. So most of what we were talking about was self directed IRAs, solo 401Ks,
Bill Fairman (00:26):
Roth accounts. We were also mentioned some Coverdale, what is the other one? Insurance savings. Health insurance plans, savings plans. But there was one more that I wanted to cover and it is called a whole life policy. And it is not very many people know about it.
Wendy Sweet (00:48):
Well that, I want to say something really quick before you go into this, because when I remember when bill first brought up this whole life policy thing to me, and you might have the same opinion that I had in the beginning, which was “Everybody knows that life insurance does not work”. If there is a scam out there, it’s “term and the only way to go” and “you are putting money in a pit”. And, and after talking to our next guest, I mean he totally changed my opinion because they have got a really good way to work it, right?
Bill Fairman (01:20):
Well yeah and most money managers will tell you that insurance policies are for insurance and not investing, savings for retirement or for financial planners and the stock market and real estate, because most insurance companies are investing conservatively and you are not going to get that return and you are just better off taking that extra that you had paid for the premium for the whole life that is going towards the savings and invest that in the stock market. You would be better off, but they do not tell you about the added benefits to this and there is only a few companies out there, a nationwide that will do the type of whole life policy. and we’re in with one. You can actually add to the cash bag. And the other thing was it takes you a long time to get a cash back. Anyway, without further ado, our friend Chris miles, he is a financial advisor by trade anyway, not to mention,
Wendy Sweet (02:26):
but he does not like to admit that does he.
Bill Fairman (02:28):
He is the Anti-money.
Chris Miles (02:30):
that is right.
Bill Fairman (02:31):
And not only that, he is a pretty good dancer. Last time we got together for an event, he made everybody in the audience get up and practice some dance. So Chris, thank you so much for doing this my friend.
Chris Miles (02:45):
Well thanks for that awesome intro.
Bill Fairman (02:51):
Chris. Give us a little kind of a holistic look at the plan that we were talking about, about the whole life policy where you can actually force early cash value on it and you know how that works cause we forced appreciation on real estate, by upgrading it. So it kind of reminds me of that.
Chris Miles (03:16):
Let me kind of jump in really quick about how I came about to be that way because I was kind of like Wendy too. I actually was totally against whole life. Like I started out 18 years ago as the mainstream financial advisor, I did that for four years. But the thing is, and this is why it is so crucial, what people are listening to with you, what you guys do with your fund and everything else is that the stock market does not return the way they say it does there is average and then there is actual returns, right? And the actual return the stock market.
Chris Miles (03:44):
If you look at the last 30 years is only seven and a half percent, that is if you put that in the calculator, you would actually get the right number, not 10 or 12 and on top of that, cashflow sucks, right? So it is not a good cashflow play anyways. So when you combine all that together, I realized about 2006 that I was really just a salesman in a suit and I was selling crap. It does not work. And by me doing the opposite of that advice by actually investing for cashflow and like the things you guys talk about, I was actually able to retire when nobody else in the financial industry was retiring. Right. And I think that is a key thing to understand. That is why I became an anti-financial advisor right later on because people, of course I was like, “I will never teach you about money again”.
Chris Miles (04:26):
“I will never be a financial advisor”. And then people were like, but how did you do it? Right? And that is kind of what pulled me out by 2007 and such. And, and around that same time I met a lot of real estate investors in different millionaires and they’re the ones that are saying, Hey, whole life is awesome. I’m like, “What are you talking about?” I was always told that whole life sucks. Like you get like maybe a one or 2% rate of return. I do better just buying term and investing in the market. That is kind of what I taught before, right? And they are like, no, no, no, it is so much bigger than that. Like, and they were even just talking about like how the death benefit gives you permission to spend money and stuff. But over the years I started realized, wait a minute, if I come from an investor perspective, I want cash now.
Chris Miles (05:06):
I want as much cash as possible. I want as little going to cost as possible. I want leverage, right? I want to do that. And that’s what I found out is that really create this really tax-free supercharged savings account right? Now same thing that people do when they take money out of their savings and they go and invest it and then they hope to get an income back. So if they go into your guys’ fund, it kicks back a return. They get their monthly payment or or quarterly, right dividends or whatever. Then when they get that return, they are like, cool, I just made some cashflow and they will put it right back into savings to try to rebuild that savings back up. But what we do with the life insurance, we do the same thing. There are some insurance cost fishing in the beginning, but if we can minimize those costs where most of your money is all going into cash, so you can use this tax free savings account that earns, at least 4% or 5% tax free average returns, right?
Chris Miles (05:54):
That is if you do nothing with it, but then you can take that money. You can get a line of credit from the, a private line of credit from the insurance company. Use that money to invest. You could take that money, you get it from cash flow, pay in towards the line of credit. And what happens is because you have got all that cash still sitting there, cause you did not deplete the cash by withdrawing all the money out, now the cash is in there earning compound tax free interest that is growing while you are also getting the cashflow, paying that loan back. What happens is almost like would you use the Heloc, it is like a Heloc that actually pays you interest. Right. And what ends up happening is now you have money growing here tax-free. And because the cash will come through, you are still going to cashflow from the investment. You end up making more money than you would just using a savings account. Just, investing, refilling up the savings, back up, investing again and refilling it back up. You create this like really faster version of an income snowball.
Bill Fairman (06:46):
So that gives you an opportunity to do one or two things. You can take the cash flow. The difference between with own payments are and what you are making in the outside investment. Right?
Chris Miles (06:57):
Bill Fairman (06:58):
You think that is income or some sort of monthly payments if you will. Or you can actually take all the earnings, pay down the line, the payments on the line, and take the profits and put it into your cash value policy. That money, obviously there is a tax of all event on that part that you have earned outside of the policy, but you are taking those proceeds and you are adding it to your balance and you are allowing that to continue to compound and grow over time. So you are basically compounding the compounding.
Bill Fairman (07:38):
Does that make sense?
Bill Fairman (07:40):
So if you do not need it as income, you can just continue to add it to your balance in there, right?
Chris Miles (07:46):
You are getting two returns in the same time, right. With the same money, you are making money in two places at the same time. Right. And that is basically what is happening. Kind of give you an example, like for example, your fund right now, like is it, how often does it pay out?
Bill Fairman (07:58):
Chris Miles (07:58):
It is quarterly. Right? Okay. that is what I thought. So obviously if you are getting money monthly, quarterly, somebody puts in a hundred grand in your fund, right? They’re going to make about what is that 1500 bucks a quarter? Something like that. So, 6,000 a year, you could take that 6,000 a year, put a Ray back in, and pay down towards that line of credit. Here is the cool thing, unlike a home equity line of credit, right? Where if you were to do that same thing now before you pay your first quarterly payment, they got to pay a couple of monthly payments to the bank. But if you do it the life insurance, there are no monthly payments. So you can borrow, you can pay it back. However, whenever you want, the deadline for paying back the loan is your death.
Chris Miles (08:40):
that is the balloon payment, right? I mean, so it is very flexible. You can pay it however you want, but the way to make it work for years time you are talking about where you make money in two places is, Hey, if I’m making money over here, it’s more than what they’re charging me. And interest over here, I can then go and start paying back towards this line of credit that they have freeing up the cash to invest again as well. And now you are making more money because that money is in there compounding. Say it was a hundred grand, they put in, say you had 200,000, that policy, you take out a hundred grand. If you just withdraw from a bank, you lose that ability to earn interest on a hundred grand that you just pulled out. But here are the full 200 grand still in there.
Chris Miles (09:18):
You get the a hundred grand kicking off that money that you are putting right back in, building that cash back up again and you are earning that extra return. So it is awesome. And the nice thing is too, like it is very, it’s just the same tax treatment is like a Roth IRA. Where you put in after tax dollars, it grows tax-free and you can access it tax-free. Right now the difference though is that unlike a Roth where your capital like six seven grand a year, you can dump in, I have people dump in like over a half million a year, like they end up as much as they want and there is no 59 and a half rolls. You don’t even have to wait until you are 59 and a half to touch the money and you get your hand slapped with that stupid penalty, I can access that money right now. Like I do not have to wait till then. So for any of my clients are saying, Hey, I want to retire at 50 or whatever it might be, or 40 or whatever. Well why would I want to put my money somewhere where they say, Hey, you can touch it, but not until you are 60. It just does not make sense here. We can get the money, use it, invested it however we want. there is no restrictions. It does not have to be like self-directed. So it is pretty cool. It’s pretty flexible in how you use it.
Bill Fairman (10:21):
Well, another advantage I see automatically as well as there is no rules for prohibited transactions either. The IRS prohibits you from investing in your self directed IRA into certain things or with certain people.
Chris Miles (10:34):
That is right.
Bill Fairman (10:36):
With this policy, you can invest that money any way you want.
Chris Miles (10:41):
That is right. that is why I say it’s like a tax free savings account. Right. Like it’s tax free savings account kind of pays you way better. It doesn’t earn point nothing percent, but it can be used freely however you want. I mean, I had somebody ask me the other day like, could I just blow it?
Bill Fairman (10:54):
I’m sorry, I’m laughing at the point. Nothing is not a good return. That is right. You make point nothing percent in the bank. You get taxed on point. Nothing percent. I mean, that is a pretty crappy deal.
Bill Fairman (11:06):
here is your tax savings right there.
Chris Miles (11:08):
That is right. You do not earn much. You do not pay anything.
Wendy Sweet (11:11):
I remembered hearing you when you presented it to us at our freedom founders event, were not you talking about how it worked for the Rockefellers?
Wendy Sweet (11:20):
Talk a little bit about that.
Chris Miles (11:24):
So the Rockefeller of, there is a guy wrote a book called, Garrett Gunderson wrote what would the Rockefellers do? And this guy actually used to work with years ago. We have taught that forever. Pretty much all it is, is just keeping perpetual money going from generation to generation, right? So that the money never runs dry. So like when you, when you have a trust, the trust is what kind of goes to your heirs, and it just takes how the money gets distributed, right. It is not just, give them all the money and boom, hope you blow it by the time you are dead. It is like, Hey, we can direct how we want this money to go to your, your kids and your grandkids and great grandkids and so on.
Chris Miles (11:58):
Well, the way to fund it, of course, especially for your state, is using the life insurance, right? The death benefit, not even the cash cash is while you are alive when you are investing, right? Then you also get this bonus death benefit that that can pay into that trust. So when you die, it pays in it funds it. It kinda creates that funded trust. Now if you have all your kids and grandkids also having policies as well, they all funded to the same family trust. And so what happens, especially if you educate them, it’s not just, you can’t just give up, set up the structure, right? It’s not just about getting a trust and everybody getting life insurance and whenever they die it pays into it to fund it. It is also gotta be education-based too. You gotta be teaching them, “Hey, how do I get, how do I actually create money?”
Chris Miles (12:40):
“How could I not be a mooch? not being an entitled trust fund baby”. that kinda thing. And so you could set up parameter to say, “Hey, you know what? Before you get access to this, really rich dad, poor dad, or do this or do that”. And if you access money from the trust, you got to pay it back with interest. So you have got to borrow from it rather than just receive it. that kinda thing. Like it is your responsibility to take that money and kind of like the parable of the talents and the Bible is your responsibility. Take it and make more with it. Not just bury it and or blow it. That would be the fourth servant if that, if there was a forced serve in the parable of the talents, they know like there is a guy just blew it. It’s like I got nothing left. Sorry.
Bill Fairman (13:23):
Well you could set up a family office if you are, if your net worth is high enough and do the same thing. I know that before they had the benefits for your larger companies back in the day before you had your pension plans, they would take their top executives and they would do the same thing. They would get a life insurance policy and that life insurance policy on those executives went towards the company to provide benefits for the executives. And when one passed away, they would replenish with it. So back to, you know, being the bank yourself when you have these policies and you can borrow against them. Why pay the bank when you can borrow from yourself and pay yourself back with interest and just continue to perpetuate the legacy. But that is right. you are right. Typically after what, three generations, the fourth one did not have any money left because they have not been trained properly or educated properly on having to get going.
Chris Miles (14:25):
That is exactly it. We will see what happens in Paris Hilton’s kids, right?
Bill Fairman (14:30):
Well listen, you are always going to have somebody that is going to be, I don’t want to say worthless, but kind of a sponge off the rest of it, but at least with a death benefit, when they do die, they put something back in. Right?
Chris Miles (14:41):
that is true. Even they blow it all it can. You put it right back in and that is kind of the cool thing about it. If you think about it like, wait, how you use life insurance? Even just think from a death benefit standpoint, which is not usually the thing I focus on a lot. But when you think about from that standpoint, it kind of gives you the permission to blow your money while you are alive, right? You can spend down on your assets or build assets. You can do either. Right? But I get some people to say, what, I do not want to leave anything for my kids. Like I want to spend all my assets like well cool, you can spend it all down. You gave him a run up a mortgage, even do a reverse mortgage. You get more cashflow that way and then the death benefit can pay it off.
Chris Miles (15:15):
It can pay off all your bills you ran up or whatever you want to do. You can do it however you want, but it’s kind of funny when you think about how that is way better than people that live today usually run thinking they’re going to run out of money at some point. Right? They are to think, “Oh well I do not want to live too long because if I do, I’m out of money and I’m broke living in with my kids again and I want to do that. Cause I do not like that son”, or whatever it might be, or his dog or dog.
Bill Fairman (15:44):
That brings up another question, so I love the reverse mortgage piece for someone, a couple of that is downsizing now has the asset of their home, which is typically your largest asset and then let’s assume it’s free and clear. Now you are going to sell that home and then downsize somewhere else. Well with a a reverse purchase money mortgage. A lot of people don’t know that those are even available. You could sell that house, take half of the money and use it as a down payment on a reverse purchase money mortgage and never have a mortgage payment again for the rest of your life. Do I have to worry about is taxes, insurance and homeowners association dues if that is where you choose to live, you take the other half of that money, you could put it into that cash value insurance policy and continue to compound that and then borrow against it and do other investments. Now that is right me and said you have to be 62 years old to qualify for the reverse mortgage. What kind of age range are we looking at to get an insurance policy and still it being affordable at that age?
Chris Miles (16:54):
If you are at least average health, you could typically do this even into your early seventies or so. I mean you can go later, but the numbers get tricky because it depends on cashflow, And, and things of that at that time. Every once in a while I’ll get people in their seventies and they do not have a whole lot of cashflow. It’s like, “You know what? We might use a different product”. We might use like a universal life because term they wouldn’t let you get term after age 70? So you might have to get like a universal life that is kind of cheap, that just gives you your death benefit and that is it. So if we did that, it’s like, okay, if we get this lump sum of cash, if it doesn’t make sense to do the whole life, well great. We could do something like a cheap universal life.
Chris Miles (17:28):
And then invest the difference elsewhere. Right. There is always awakened work. It just depends. But, and the strategy I talked about where you get to double dip on your investment returns and make money twice, and that is usually best when you are in that accumulation phase, right? When you are building your assets, trying to build your cashflow, that is when it is perfect. If you are at the point where you are now saying, I’m just trying to consume money at this point, , then we might switch it up. We might just say, Hey, minimum death benefit. We just need the minimum amount. We don’t need an overfunded, like what I usually do with my policies where you dump in more cash and that is what goes into that account faster. We might just say great, simple, easy, invest the rest. Nice.
Wendy Sweet (18:06):
What would a young person do?, somebody that is kind of newish, maybe have a young family. I’m thinking, they do not have a whole lot of money to put in, so, so where would you go from that direction?
Chris Miles (18:19):
I actually just had somebody like that last night I talked to, he is like 29 years old. He’s got two young kids, one on the way and he was like, “Hey, I think this concept is cool. I want to start investing at some point”. And I was like, “Okay, well how much per month or year are you trying to save up to do that?” And he’s like, “well maybe like five 6,000 bucks.” And we are trying to put away, we’re trying to put away 700 a month to build our savings. All right. I’m like, “we could do this strategy.” And I showed him like a really basic $5,000 a year type policy. And because he is younger and in good health it is cheaper, right?
Chris Miles (18:52):
So the younger and healthier you are, the easier it is to not only put in less money and make a better return, but you get all kinds of flexibility. So I showed them that, but it didn’t quite meet all their needs, what he wanted for insurance. I was like, great. We’ll buy some convertible term, so he got him another half million of term as well. And the cool thing is via convertible term you can convert that at any time without having to re qualify your health. So like, like for example, I had a guy that was up in Maine, it was a, it was a healthy doctor, 65 years old. we have got a whole life policy for him and we got some term insurance, right, just to kind of cover that basic death benefit need. And of course about two years later he got diagnosed with brain cancer.
Chris Miles (19:35):
It was inoperable. So he was doing treatments flying all over the country and everything. And fortunately a year and a half later it was gone. No evidence of it at all. Right? So he beat the odds. Problem is if he tried to get insurance, it’s impossible because now they are like, Oh, what if it comes back? We don’t want to reassure you. Right? But the good news is we got that term insurance when he was perfectly healthy. So that term insurance now we can convert and it actually they, they will give them that perfect health. So they’ll treat him as if he was in perfect health when we convert that to a whole life policy. So it’s a, it’s kind of a kind of a cool thing to do it that way. So if you are young, I mean sometimes if you can do it, if you are strapped for cash though, we don’t even worry about doing a whole life.
Chris Miles (20:16):
We just say, great, let us do a convertible term. When you have got more cashflow or more money, then we start throwing some money in it, so we can get a get better return on it.
Wendy Sweet (20:24):
Wow, that is incredible.
Bill Fairman (20:27):
That is awesome. Are you taking individual clients or are you looking for financial advisor insurance? Licensed insurance agents as clients.
Chris Miles (20:40):
I have already got some guys that have been training off the sites. I really, I’m taking on individual clients. Just to do the life insurance and the consulting and things like that.
Wendy Sweet (20:49):
Bill Fairman (20:50):
Go ahead and tell us how you want to be contacted.
Chris Miles (20:54):
Well one, I mean definitely I would invite you guys to follow my podcast, which is called the Chris miles money show. It was a really unique name. It took hours and days coming up with his name, but check out the Chris miles money show.
Chris Miles (21:07):
It’s on iTunes, and all the other podcasts, apps and such and you could also just go to my website, moneyripples.com and there is some great blogs on there, some good information, even an ebook that I have that is massive 28 pages. Could I put page breaks in it? So, it will take you like maybe 20 minutes to read through it all, but it’s got awesome tips on ways to actually increase your cashflow to, to, to the tune of like 34,000 a year as the average.
Bill Fairman (21:34):
Wow. Nice. so we are going to have all those, links in our show notes as well as on any of the videos. And that reminds me, by the way, thank you guys so much for joining us. Please follow us, please like us. And then tell your friends. We have some other shows here for other shows that you get to go on exactly where they are in the screen, so look around it. You will see some links there and.
Wendy Sweet (22:05):
And Chris’ information as well.
Bill Fairman (22:06):
Right. Chris, you have been awesome. Thank you so much for joining us.
Chris Miles (22:10):
It’s been a pleasure. It’s been a lot of fun, guys. Thanks.
Bill Fairman (22:11):
We will see you guys on the next show. Thanks
Speaker 4 (22:21):[inaudible].
Bill Fairman (22:22):
So thank you so much for joining us. If you really like what you heard, you want to see some more switch over here or here or perhaps there there is more episodes, but they are somewhere click it on there. Either way, subscribe and like us.