What Mark Ford is promising in his latest pitch for the Palm Beach Letter, is about an account that’s been used by the wealthy. And by “six different U.S. Presidents,” including John F. Kennedy and Franklin D Roosevelt, whose pictures aplomb some of his ads. The sales pitch is all about generating interest into an “IRS-exempt” retirement income, for folks who are looking for a better retirement.
So here is the explanation… Dyson calls it the “770 account” to make it seem enigmatic (that’s what makes it intriguing also), honestly, it’s a cryptic on its own, even if you don’t give it a devious name.
I think, similar insurance products are already being touted by lots of sleazy infomercials, whose potentials make you wary, with names like “Bank on Yourself” and “Infinite Banking” and such.
I’m pretty sure Tom Dyson is chattering about some kind of life insurance here, well not just ordinary life insurance (that makes sure your family’s not impoverished if you die), but probably a precise class of permanent life insurance that is called “whole life.” Rather it’s more of a wealth protection and tax savings policy.
Whole life insurance is typically an arrangement between you and the insurance company, where they promise to pay you an assured sum when you are no more. And the contract never expires as long as you are making the payments.
Well, that clearly defines the payments are larger than that of, typical term life insurance policies, as a term policy expires at some point in time — and a term life insurance policy practically never pays you and, so it’s apparently cheap.
That’s because you’re young and healthy and the policy expires when you’re 55, that’s when mortality risk takes you over. Pretty confusing eh? Please bear with me as this write up is meant to cover folks who understand insurance, and are on the lookout for a better retirement solution.
Update by Anum 1 December 2013:
You could defer the realization of income by using the cash advanced against the surrender value, but then you have to pay interest on the loan. So the idea that there is some unadvertised “secret” plan is (of course) pretty much expected from newsletter vendors.
IRS Section 7702 by the way is used for the purpose of calculation of taxes relating to Life Insurance. There is no such section 770 of the IRS. It seems they have used the number to create a clandestine around IRS section 7702 while deliberately leaving out the last digit to mystify the pitch.
An Update to this by Roy Torres: 14 Nov 2013
It’s universal index life that invests your money in the stock market, ironically, but is managed with a stop loss in place so that you get a guaranteed 6% or more and the insurance company keeps any additional profits. The insurance company will actually guarantee it because they will make more.
Permanent Life Insurance policy with a Paid Up Additions Rider essentially does turn you into your own bank where you can finance all of your own purchases and pay the interest back to yourself through these specially designed policies after it is seasoned for 5 years.
They can’t call it an investment however and so no one knows that it is a great “investment”. Plus, if you die or reach 100 years of age, a lump sum payout will be in order that will far exceed your buy in. Brokers get a commission just like any broker who sells anything does.
Any money you borrow against it, is charged interest but the money is yours so the interest you pay actually gets credited to your account. So effectively, you become the bank. Just like a 401k, if you borrow from it, the interest you pay gets credited to your account.
It’s not new or any secret, but like all insurance, it is highly regulated.
Update by Craig Sedery November 20, 2013
There are two major forms of life insurance – Term and Paid-up Term insurance is the newer version of the two. Then there are versions of each that can provide services to different scenarios. Term insurance is temporary insurance where the amount of the insurance premium versus the insurance benefit is based on the age of the insured.
Paid-up insurance premiums are based on a person’s longevity and the type of plan you are applying for. In Paid-up you can have Single Premium Purchase, Age 65 Paid-up and Whole Life Insurance, each provides different types of coverage.
AND the newest of the insurance plans is the Universal Life Insurance plans which are a hybrid of Term and Paid-up. your premiums are held in an account and the insurance is term insurance. the account allows for surplus while you are young, this surplus is used to help pay the premiums as you get older. Contact your insurance agent for the best fit for your needs.
In summary – Term Insurance is a good buy as long as all you need is to provide a death benefit, paid-up is more expensive but can give you more options. Best of luck to all!!