Business Innovators Radio - Interview with James Johnson President & Owner of All Mark Insurance Services – How Life Insurance Fits into Retirement

Episode Date: February 23, 2024

James has been a business owner, a mentor, and an entrepreneur for over 28 years.As an ex-Marine and black belt in Judo, James does nothing in life he isn’t passionate about. His continual interest in provoking thought and conversation led him to the financial industry. “Being able to help hundreds of individuals, families, and business owners achieve their goals in life not only financially, but spiritually,” James states, “is a very powerful thing.”James has aligned himself with hundreds of his clients who are willing to learn and take control of their future. His core belief is only when we are learning, are we growing.James is consistently top in his field; staying educated and staying on the cutting edge of laws, regulations, and industry news. He is a proud member of Million Dollar Round Table (MDRT), and was a Master Elite Advisor for Ed Slott (America’s IRA Expert) for 9 years.With this vast knowledge of the financial industry, he was chosen as an expert on the “Ask the Expert” program series on AM radio in the Inland Empire.Learn More:https://www.yoursafemoneypeople.com/Influential Entrepreneurs with Mike Saundershttps://businessinnovatorsradio.com/influential-entrepreneurs-with-mike-saunders/Source: https://businessinnovatorsradio.com/interview-with-james-johnson-president-owner-of-all-mark-insurance-services-how-life-insurance-fits-into-retirement

Welcome to influential entrepreneurs, bringing you interviews with elite business leaders and experts, sharing tips and strategies for elevating your business to the next level. Here's your host, Mike Saunders. Hello and welcome to this episode of Influential Entrepreneurs. This is Mike Saunders, the authority positioning coach. Today we have back with this James Johnson, who's the president and owner of All Mark Insurance Services, and we'll be talking about how life insurance fits into. retirement. James, welcome back to the program. Hey, thanks for having me back. Hey, so I know that a lot of people just pretty much tuned us out when I said the words life insurance. So we probably should jump right into the fact of that there are some misconceptions

that people have about life insurance. So let's jump right into when you were meeting with a client or someone asking you these questions. What's the first thing that you're explaining to them about how life insurance in the way that they think that it is sometimes is not that case. And there are some really huge and amazing benefits there for them as opposed to like the old school. I don't need no life insurance. Well, you know, as we talked on our last episode, like do you have life insurance? And the answer for most people is no, they have death insurance. Although they believe they have life insurance. They don't call it what it is because if they call it what it is, nobody would buy it. And so let's Let's talk about a wants versus needs approach to this.

Now, I want you to understand that the most underutilized asset that everybody has, and I have yet to meet a person that didn't fit into this, is their insurability, all right? There are absolutely amazing things you can do with your insurability if you understand all the rules of the game. And I can tell you very few people in this country that are agents, etc., really understand all of the rules of the game because there's so many rules. So we go back to talking about death insurance. Well, death insurance is you buy the most insurance using the least amount of money for the purpose of dying. And that's what most people do.

That rule is set by the insurance company. Insurance company says you give me this amount of money. I'll give me this amount of insurance. Now, the cheapest possible way to do that would be term insurance. But here's the depressing thing about term insurance. Only 2% of term insurance is ever paid out. So the insurance companies love insurance term insurance, because the reality is they're only going to sell you that insurance on a 10, 15, 20, 25, 30 year term. And that term is never going to be out to the point where your actual life expectancy is. So the closer you get to your life expectancy, the shorter the term they will sell. you. The next thing you can buy is you can buy what's called permanent insurance. And so permanent insurance will be a whole life, a variable life, an index universal life. And what you're going to do, instead of minimum funding the policy, you're going to overfund the policy. So the policy will build up a cash value inside of that policy that over time will help to keep up with the cost of

insurance, which will ensure that no matter how long you live, that insurance will be there to pay your heirs. But did you know that it's actually possible to maximum fund a policy? Now, I asked this question just before we got off the last thing, and that is if you could grow your money tax free, you could access up to 85% at any time tax free, put it back, get most of the gains in the market, never participate in losses, and when you died, it passed on a two to three times that amount tax free, would you want to do something like that? And the answer is always yes. How much we put there, as much as they would possibly let me. All right. So when we talk about a wants versus needs, when we look at death insurance, as I call it, okay, how much death insurance

do we actually need? Well, if we're single and we don't have any children or anything like that, we need none. I mean, literally, who's losing if we die? I mean, there'll be some emotional stuff going on, but nobody from a financial standpoint is actually losing. And if we're married and we have children, and now we have a need for some death insurance. But we could take both of those situations and we could talk about how we can grow our money tax-free and put it back and get it out anytime we want. And then that suddenly is not about a need. That's about a want. And once you understand that want, then you can begin to understand that this is another avenue

to start building a tax-free retirement account. Now, let's compare that to, let's say, a Roth IRA. So if we go out and we do a Roth IRA, we have one. limitations on how much money we can put in that Roth IRA. Now, currently those limitations are about $6,000 if you're under $50,000 and $7,000. I believe this year has actually gone to $7,500 and $5,500. And then if you're in a qualified plan, somewhere between $20,000 and $30,000 that you can put into a qualified plan depending upon your age. That's it. You can't put any more in. Now, a lot of people listening to this are like, well, that's my paycheck for the whole year.

But remember, one man's floor is another man's ceiling. And so other people have much more money than that. And where did they put that tax free for their future? And the answer is they could put that in life insurance. Now, if we put it in a Roth, we can take out a contribution into a Roth at any time. We cannot put it back, but we can pick it out at any time. What we can't take is we cannot take out the growth for five years or 59 and a half, whichever is longer.

Otherwise, not only do we get taxed on the growth, we also get penalized on for taking it out early. Whereas when we put the money inside of life insurance policy, we can take it out anytime we want. Also, in a Roth IRA, they can change those rules pretty much anytime they want. Now, recently they actually had an RMD on a Roth IRA 401K, which was kind of the dumbest thing I ever heard of because it's not like a benefit to the government to get that money out of that tax-free account other than put it into a taxable account. But there was really no benefit for them tax-wise. They did repeal that and it's no longer mandatory to have an RMD, but they could put RMD's back on to a Roth IRA at any point. I think it's more likely that what you'll see with regards to Roth IRAs is they'll eliminate them. They'll make it so that you cannot use them in the future.

Now, nobody knows one way or another way that that will happen. Whereas a life insurance policy, the chances that they're going to do away with life insurance is about slim and none. The chances that they're going to do away with the tax benefits of life insurance is about slim and none, once you understand how that actually works. Now, some of the other things that we can do at life insurance, and please, Mike, feel free to stop me at any point or redirect me at any point because you'll find about me as I could talk for two days and not shut up and not get it all out. Okay, well, one thing that I'll ask is at this point, it makes me think one of the first

questions I asked you is like, oh yeah, life insurance people think I'm good to go. And you mentioned term versus permanent. It made me think of an analogy, and I think it really might apply here. It's like renting a house versus buying a house. When you rent, you're making someone else rich, and you don't have the equity growth of the tax right off. But when you buy a house, and my oldest daughter and her husband just bought a house last weekend and moved in yesterday, and now they have some equity growth that's going to begin. They will have some tax benefits now starting for them. So that seems to me like that's a difference between term, which.

is like renting and then buying, which is now giving you all the benefits you're talking about. That's correct. And then we talk about maximum funding, okay? Yeah. So maximum funding is we do exactly the opposite of minimum funding. Rather than putting in the maximum amount of insurance for the least amount of money, we buy the minimum amount of insurance for the most amount of money. Now, interestingly enough, who do you think sets that rule? I would say the government.

That's correct. Now, why is it the government is concerned about how much money I put in a life insurance policy? And the answer is very certain. Because somehow some way it's got to benefit their back pocket. So if they allowed you to put too much in, then you'll have multi-billionaires just funding the insurance policy and shielding all of that money from being taxed. You got it. Okay. And so it used to be that you could go slam millions of dollars inside of a policy overnight, just like that. All right. And then they came out with these ERISA plans and they found that all the money was actually going to life insurance rather than they're in RISA plans. So they changed the rules. And they, what they did is they came out what were they called the MEC laws, which is a modified endowment contract or a maximum efficient contract, however you want to use those words. But the proper word is modified. endowment contract. And the enacted a set of laws called Tefra, Deferra, and Tamra, which said,

this is the minimum amount of insurance you can buy. This is the maximum amount of money you could put in this policy on day one. And this is the maximum amount of money you could put in this policy in the first 10 years, depending upon how it's designed. And that changed the game a little bit in that it became a little bit more complicated so the average person did not use it. Whereas anybody that was to take the time to actually learn this stuff will suddenly realize that there's not a better way to do it. However, I have something that I beat into people's heads and I say, look, there are two questions you should ask before investing a penny of your money in any investment and I don't care what it is. All right. It's really simple. The first

question is what's my exit strategy how do i plan on getting out and the second question is what's bad about this you see mike you're never going to be upset about the good stuff it's going to be the bad stuff that upsets you and so understanding the bads before you get involved will always be a better thing than having them come around and bite you from behind you follow me on that yeah because then then it's like expect the unexpected you you have a little contingency playing because you're thinking ahead. Correct. And what's interesting about that is that if you listen to the talking heads on radio, the Dave Ramsey's, the Susie Ormonds, et cetera, they'll always just focus immediately in on the bads, but they're not focusing in on the goods. And when you do some

comparisons, okay, you actually compare one way to another. Neither way is best, okay? but it's best to have some diversity, all right, and have your money spread around in different areas. And diversity does not mean low, medium, and high risk stocks, bonds, and mutual funds, all right? Diversity means having some real estate, some life insurance, some annuities, some stocks, some bonds, some cryptocurrencies, some gold, some silver. It means that when a mouse farts in Europe, you don't lose everything you have, right? You have some money in different areas to control money differently. It also, by doing things like building a maximum fund life insurance policy, it gives you diversity in your exit strategy. Because see, later on, when it comes time to take

money out, you're going to want to do what are called tax-wise distributions. Remember, you have three ways to grow your money. Taxes go, tax deferred, tax-free. Well, if you need money, when you're at a point where you're in distribution and you need money and your market accounts are down, you might want to be going to your non-market accounts to subside what you need at that point while your other ones grow back up. Now, I'm getting off track here because, like I said, I'd like to tell you about 50 million things, and there's just not enough time to do it. But to sum up life insurance, there are so many things you can do. It's amazing. Let me tell you this.

One of the best retirement accounts you could ever have in your entire. wife would be to buy death insurance on your parents today. Now, you think about that. If your parents are still alive today, what are the chances they'll be dead by the time you retire? Probably pretty good, given the age. So where could I go today and use small dollars to buy large dollars that are going to be tax-free that would outperform that death insurance policy? And people say, well, that's so morbid. You know, that's just the reality of life, Mike.

People die. And the rich do this frequently. What they'll do is they'll ensure the more elderly folks. And then they use that money and they leverage it out, buy a property, whatever the case may be off of that. Now, that's just one way to do it. The other way to do it is be out maximum funding of policy. And in all fairness, there is another way to go out and put money in life. and it is a whole life policy.

And there's absolutely nothing wrong with whole life. So there's indexed universal life and whole life. Depending on who you're talking about, one will tell you one's better than the other. I happen to believe that IUL is a little bit better than whole life. But if you have a whole life, that means you don't get rid of it. All right. It's just it operates differently.

And if you understand how the two operate, you're more likely to go with the IUL than you are with the whole life. But that choice is always yours. The one thing I will tell you is stay away from varium. That would be the one piece of advice I would give. Outside of that, I would tell you that life insurance is one of those tools that most people don't use because they don't understand. And the most underutilized asset that people have is their insurability. You know, let's talk about that for a second because insurability to me means if I wanted to get that term life insurance,

I've got to pass all kinds of health test. And then when that term expires, 10, 15, 20 years down the road, I've got to go get more health tests and hope that I qualify. Whereas that permanent life insurance policy, when you qualify, when you set it up, you don't need to re-qualify in 10 years or 20 years or whatnot. So it eliminates that stress off of you, right? Well, yes and no, because there's 100 ways to do this. So you can go out and buy a term insurance policy today and actually buy a term insurance

policy that is what's called convertible. So all the way up until a couple years before the policy lapses, you will have the ability to convert that policy to a permanent life insurance. So let's say, for example, that you're just a young family. You know, you're 21, 22, and you're getting started and you just can't afford anything else, all right. So you're going to go out and spend $20, $30 a month, whatever it is, to buy yourself a half a million dollars in coverage in case the worst happens. And the greatest part about that is if you buy it and you buy correctly and you buy it convertible, then later on in life, as you begin to make more money and you have more money, you could convert that to a permanent policy. Now, keep in mind, you're still buying

death insurance. Whereas you could change gears and go with a whole life for an index universal life policy and buy less insurance because you're probably not going to use the insurance and use that account to be building up money to pay for your kids college to possibly finance your first house, all of these other different types of things. There was a guy named Nelson Nash that came out with this event in the beginning with a concept called infinite banking. And when you begin to understand that and you begin to understand how that works, you're probably not going to buy a term life insurance policy. You're probably going to buy a permanent life insurance policy and maximum fund it.

Because to your point about death benefit versus living benefits, when you set this up properly the right way, and again, like we've said before, don't run out and go Google something and go click buy it and think that it's right. You've got to make sure that it's properly structured and all of that for many reasons. But let's talk about a few of those things, like you mentioned, buying investment property or funding college. how long typically do you have to have that type of policy to be funded so that you can then do some of those things that you want to do during retirement while you're still alive? So that's actually a great point. And the answer to that is dependent upon how much money you're putting in it. I mean, I have people that are putting in $400,000, $500 a year into these policies. And I have other people that are putting in $400,000 a year into these policies. So those are two very large spectrum. It, remembering that one man's floor is another man's ceiling, if your maximum funding a policy, you can be accessing that cash from day one. You literally could be getting it from day one. But the problem is, is going back to what's bad about this. The problem is, isn't that first

10 years, you're losing some of your liquidity of your money. However, as you build up that policy, there is no longer need to keep large amounts of money in a bank for emergencies because that policy becomes your emergency account. So if you've got, call it $20,000, okay? And you've got a choice. You can put it in your bank where they're paying you, whatever rate they're paying you. And at the end of the year, they send you a 1099,

so you're really not making that rate. Or you could go park it over in a maximum fund of life insurance policy where it's growing tax-free, most of the gains of the market, never participate in losses, and you get access it any time you want, which one would you choose? And if you understood the bads, which are, there are quite a few fees in that first 10 years when you're funding that policy, so you're losing some of your liquidity, and they have what's called a surrender charge, and you understand that for that first 10 to 15 years, those are things you're dealing with, and you can deal with

that, then you're on the right track. But if you're 16, years old and you're planning on retiring the next five years and you're going to go build one of these things and plan on using it in six years, it's just not going to give you the bang for the buck that you want. Not that you couldn't still do it, but if you need to access that money, if your exit strategy is much shorter than the runway you need, then it doesn't make sense. Yeah, and I think that that mindset there applies to so many things regarding retirement is having enough runway to put certain things in place to allow them to, you know, come to fruition. Because like what you just mentioned, you can't just put it in and get it out most of the time.

You've got to let it, you know, build up and let it, you know, season or however you want to think of it that way. So too many times people just put stuff off like, oh, someday I'll handle retirement. But you should be having plenty of runway ahead of those decisions so that the, you know, the planner, the financial services professional that you're working with has enough options to make some of these recommendations or else the window is too short. Yeah, it goes back to what I said in the beginning, and that is that people don't plan to fail.

They fail to plan. They see bright, shiny objects and then run after them. Let's go get this one. Oh, I don't, this isn't working and they get out. Okay. This isn't a long, this isn't a short-term plan. This is a lifetime plan. And if you're out here doing things based on a lifetime plan, you're going to do pretty well.

It's important to understand that they're really only three types of people in the world, Mike. There's spenders, there's savers, and there's wealth creators. Now, if you want to be a wealth creator, you have to be proactive and you have to plan for the long term and not the short term. And I do want to urge everybody that's listening, don't run out and start doing this stuff. don't think you're just going to go out and Google something and find out everything you need to know. There's much, much more to know here before you start down this road. And I think, James, some of the points you brought up makes people kind of think, oh, that sounds too good to be true.

And that's amazing. So this must be some new, untested, you know, opportunity. But in reality, permanent life insurance for used in these purposes that's been around for 100 years. Yeah, or more. And, you know, here's a funny one for you, Mike. You know, where do banks keep their money? By the way, real quickly, who has more money? Banks or insurance companies?

I would think the answer typically would be banks. No, it's actually insurance companies. It was insurance companies that bailed out the banks and the governments during the Great Depression. Banks have little to no money. So what banks do is they take your money in. depositor and then they leverage it up four to one with the government money. Okay. And then they loan it out.

If banks aren't loaning out money, they're out of business. Okay? They have to be loaning money. Now, here's a very interesting fact. And I defy any one of you to go out to FDIC.org and go pull up your banking account, a bank's balance sheet and verify these numbers. But where do banks keep 25% of all their tier one liquid assets? I would guess you're going with a lot of.

insurance policies. Insurance companies, okay? The best loan that a bank can make in the world is loaning to an insurance company. And the reason why is is because the bank is 100% guaranteed. They don't have to worry about loan to value, any of those types of things, because they're 100% guaranteed on that. I can show you what are called premium finance cases that are absolutely amazing. They buy $75 million worth of insurance with zero money. Okay. The bank pays for it. And people, what? Yeah. If you're, if you are at the right financial level, right? If you're, a state is worth at least $5 million, the things that you could do with insurance are just unbelievable. I mean, you know, they say, oh, it's too good to be true. Well, and sometimes it appears that way. But the reality is, is it is true. Well, it's, I really want to zero back in and wrap up with this thought, which you said, you know, these things might sound too good to be true, but they're proven and, and they've been around for over 100 years. And it is something that you should be cautious on not going out and just going, oh, I heard something. Let me Google it and go click, set this up, because it might not be set up the right way for your situation.

So if someone is interested in learning more about all of these topics and reaching out and connecting with you to see if you could lay out a blueprint and a path forward for them, what's the best way that they can do that, James? So they can always reach out to our website, which is www. YourSafmoneypeople.com. That's Y-O-U-R-S-A-F-E, M-O-N-E-Y, P-E-O-P-L-E-L-E dot com. There you can get us through our YouTube. page, LinkedIn, et cetera. I do have a course that's just on life insurance, all right, that they could request or go out and get.

They'll find that all out on the website there. But please, do yourself a really big favor. Don't run out. Talk to your local insurance agent. And so I want to do one of these because I'm telling you that it's a small handful of people in this country that really understand not only the tax implications of this, but how insurance works on all levels. to design this stuff correctly.

Okay? Don't just run out and try to do it yourself because you're probably going to find yourself very upset in a few years. Perfect. Well, James, thanks so much for coming back on. It's been a real pleasure talking with you. It was a pleasure. Thank you very much. You've been listening to Influential Entrepreneurs with Mike Saunders. To learn more about the resources mentioned on today's show or listen to past episodes, visit www.

influential entrepreneursradio.com.