The Situation:
James Johnson was a solopreneur trucker. He owned an 18-wheeler making cross-country deliveries and earning approximately $30,000/month. He was 50 years old and in good health. He had $150,000 in a savings account earning .05% a year. The savings were used to service the truck, buy new tires and used as an emergency fund. He wanted to put a plan in place so that he could retire at age 65, 15 years from now. He needed to build up a fleet of trucks with drivers in order to make his business sellable.
The Solution:
He took on a properly structured (Max-Funded) IUL (Indexed Universal Life) policy. This is a permanent policy that maximizes the investment portion and minimized the life insurance portion of the policy. This process creates an Infinite Banking & Tax-Free Retirement scenario. The proper structure was as follows:
- Life Insurance Coverage on day 1 = $1,700,000
- Premium of $5,000/month for 15 years
- Transfer $75,000 cash (1\2 of his savings) into the policy on day 1
- Life Insurance Coverage in year 15 will be $3,000,000
- Ability to borrow from the insurance carrier (Infinite Banking) at a variable rate of 5% max….
- While earning compound interest on the entire investment piece at 8%-12%/year on average
- Tax-Free Retirement income equal to 3+ times total premiums paid.
The Projected Results:
Years 1-15
- At the end of Year 2 the policy’s cash value is $171,000, Borrowing Limit $131,000
- Borrows up to $130,000 for a down payment on a 2nd 18-wheeler (average cost $150,000 – $250,000) (Total 2 trucks)
- Over the next 3 years pays back the loan from the profits of the 2nd truck. The profit, on the low end, is $4,000/month, over 3 years, the expected earned profit will exceed the loan amount ($4,000 x 36 months = $144,000)
- The end of Year 5 the policy’s cash value is $352,000, Borrowing Limit $320,000
- Borrows up to $320,000 to purchase 2 more 18-wheelers (total 4 trucks)
- Over the next 3 years pays back the loans from his profits.
- At the end of Year 8 the policy’s cash value is $573,000, Borrowing Limit $545,000
- Borrows up to $545,000 to purchase 3 more 18-wheelers (total 7 trucks)
- Over the next 3 years pays back the loans from his profits.
- At the end of Year 11 the policy’s cash value is $847,000, Borrowing Limit $827,000
- Borrows up to $827,000 to purchase 4 more 18-wheelers (total 11 trucks)
- Over the next 4 years pays back the loans from his profits and makes sure his fleet is running smooth.
Years 15-40
- Year 15 Stops paying the premiums on the policy (As stated on original policy)
- Begins collecting tax-free income of approximately $11,000/month for 25 years from his policy (Projected at $3,384,000)
- Sells his trucking business with 11 trucks for somewhere between $3,000,000 and $5,000,000.
Key Benefits:
- Business Expansion: The IUL policy provided capital for fleet growth, increasing from 1 to 11 trucks over 15 years.
- Tax-Efficient Retirement Income: The policy offered a tax-free monthly income of $11,000 for 25 years post-retirement.
- Wealth Accumulation: Johnson built a sellable business valued at $3-5 million while maintaining a life insurance benefit.
- Financial Flexibility: The policy allowed for strategic borrowing at favorable rates while continuing to earn returns on the full cash value.
- Succession Planning: The strategy created a valuable, sellable asset, ensuring a smooth transition out of the business.
This case study demonstrates how a well-structured IUL policy can serve as both a business growth tool and a tax-efficient retirement planning vehicle for entrepreneurs in the trucking industry.
Set up some time on my calendar so that we can determine if “Infinite Banking” and “Tax-Free Retirement Income” can be applied to your personal situation:
