One of our newest retirement planning strategy is called a SOLI, which stands for Structured Optimized Life Insurance. And in this video, I'm going to explain what it is, how it works, who it's most suitable for, and why you should consider getting one. So let's get started.
Traditional life insurance retirement plans have been around a very long time. And the reason that many people prefer life insurance for retirement planning is because of the unique tax benefits associated with life insurance. See, under IRS code 7702, the money that grows inside a life insurance policy grows tax deferred and the death benefit is income tax free. In addition to that, life insurance companies have what are known as loan privileges, which allow you to access your money while you're living, also without any taxes. So in essence, you're growing your money without taxes, you're passing it onto your beneficiaries without taxes. And if you need it while you're living, you're also getting it out without any taxes which is pretty cool, huh?
One of the reasons that many financial planners are not a fan of this type of strategy is because historically speaking, traditional life insurance policies have performed anywhere from 5%, 6%, or 7% over the life of that policy. But in my opinion, that is really not that big a thing, considering that it's done in a much more safer way and also in a tax preferred way.
Thanks to new innovations in the financial services, our new structured optimized approach is a game changer.
The net effect is that it is now possible for us to get you higher rates of return compared with traditional life insurance policies, to help you maximize your retirement benefits. The SOLI solution utilizes options inside a life insurance policy. Every year, the client gets an option to buy call options inside their life insurance.
And what those options do is that it provides a multiplier effect on your returns. So when the stock markets are up, you get a multiplied return, but when the markets are flat or down, all you lose is a price that you'd paid for those options, which is sometimes much lower than what you might've lost on your investment portfolio. And the other cool thing is every year you get to lock in your gains at your policy anniversary. So here's a crazy, true story of one of my associates client who got credited 152% in one year with this strategy.
If you recall back in March of 2020, when COVID hit and the stock market dropped like a rock, this lucky guy had a policy anniversary and he chose these options. So from March 2020 to March 2021, the S&P index performed around 61%. And with this multiplier of 2.5, he got credited 152% in one year. And when I heard this, it just blew my mind. I didn't even think something like that was even possible inside a life insurance policy. And the other cool thing is all the gains that he just got were locked in now for future growth.
Of course, this is an extreme example of what is possible utilizing the strategy, but just keep in mind returns like this are not guaranteed. The way I see it is that if we can get a few good years with up markets, we could probably average a pretty decent return over time. Wouldn't you agree? Now let's do talk a little bit about why you should consider a strategy like this. Now, I can get into taxes, our national federal deficit and how it's getting out of control, as well as a new proposed tax plan that President Biden has, which may cause higher taxation for us in the future.
But my main reason on why I chose a plan like this for our family was quite simple, I just asked what's the worst that can happen? See, if you ask most people, what do you want your money to do for you while you're living? You'll probably hear things like take care of me, provide me security, and give me freedom todo what I want to do. And after I'm gone, go take care of my family, my kids, my grandkids, and maybe some charitable causes too. Now, if those are some of your intentions as well, I believe we can accomplish most of these things with a plan like this, providing that you're willing to play by the rules, stay committed, and do the need for.
So the other cool thing about our SOLI strategy is that in addition to the retirement benefits, you can also have chronic illness benefits built inside your policy, too. These can be used to pay for things for like long-term care needs, like assisted living, home health care, nursing home benefits, and you can use your cash values and or death benefits to pay for those things on a tax-free basis. So based on that, the way I see it, the worst things that can happen with a plan like this is that your returns may not be as high as some of your other investments, but it will most probably be a pretty good return, a safer way to invest, and also a more tax preferred way to transfer your wealth from yourself to your family.
Now, the final question is who should consider something like this?
Now I'll tell you upfront that this is not for everybody. If you're struggling to make ends meet and do not have the necessary discretionary income nor the savings, this is probably not right for you.
But if you do have the financial means, this is definitely worth looking into. So here are some situations that I believe are a good fit for a strategy like this.
So if you want to learn more, schedule your discovery call with me today, and let's talk. We have a simple questionnaire to help us determine if this is right for you. And we also have some ongoing webinars that you can attend to help you get more educated and give you the details.
Check out our webinar on "The Never Taxed Retirement Strategy!