October 1, 2025 • 11 mins
“Hey, Mike, how do you manipulate life insurance so that the cash value grows better?” Learn how proper structuring—not manipulation—may turn life insurance into a tax-efficient planning tool.
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Mike (00:00):
So now, just imagine for a moment, you've covered the death
benefit you really needed duringthe time that you needed, you
put money into this thing for acouple of years, and then when
you start to retire, the deathbenefit's so small and you've
got a way that it's kind ofcovering itself, you now have
this vehicle that has reasonablegrowth potential, can't go
(00:22):
backwards, and you've kind ofoffset the fees through just not
manipulating, but structuringthe policy correctly. Welcome to
how to retire on time, a showthat answers your retirement
questions. We're here to movepast that oversimplified advice
you've heard hundreds of times.Instead, we do wanna dive into
the nitty gritty because, well,it matters. There's no such
(00:43):
thing as a perfect investmentproduct or strategy.
Heck, there's no such thing as aperfect or riskless retirement.
That's why these details matter.Text your questions to (913)
363-1234, and we'll feature themon the show. David, what do we
got today?
David (00:57):
Hey, Mike. How do you manipulate life insurance so
that the cash value growsbetter? Yeah. Sounds like a
trick question. Who who canmanipulate?
The life the insurance companiesare too smart to manipulate it.
Is that fair to say?
Mike (01:12):
They're not manipulated. I think it's more about
understanding how to shop.
David (01:18):
Okay.
Mike (01:20):
And here's what I mean. If you want a million dollars in
term life insurance, you'regonna pay X. If you want
2,000,000 in life insurance,you're gonna pay around 2 x.
Right? It's real simple.
You are paying a certain premiumfor the risk the insurance
(01:40):
company has inherited or takenon, with the odds being in the
insurance company's favor. Youwith me so far?
David (01:48):
Mhmm. Yes. Yes.
Mike (01:49):
Okay. The reason why I think the word manipulated is in
here is because according to theIRS code, I think it's 7702,
line seventy seven zero two, ittalks about how life insurance,
if funded correctly, can growtax free, you can borrow against
it without paying taxes, andwhen the death benefit hits,
(02:10):
when you die, then it kind ofcleans up all of the policy and
then pays the beneficiaries taxfree. So a lot of people will
use life insurance as a part oftheir plan, whether it's their
financial plan when they're intheir thirties, forties, and
fifties, or in their retirement,if they've got their, you know,
(02:32):
fifties, sixties, seventies,eighties, or so on, to do a lot
of cool things. The problem withit though is with life
insurance, the higher the deathbenefit, the more cost of
insurance you're gonna pay.
David (02:49):
Okay. And that's sort of a general rule, that's a
standard
Mike (02:53):
Well, yeah, if you die, they're gonna pay out a high
premium. Yeah. So the questionis, you have to have what's
called a corridor. It's thedifference between the cash
value and the death benefit.
David (03:02):
Okay.
Mike (03:03):
The smaller the corridor, the less risk the insurance
company is taking, which meansthe less premium or cost of
insurance you're gonna have.Okay? So life insurance is not
an investment. That's the firstthing we need to discuss. Okay.
However, I have seen many peoplewho say, Well, we want a death
(03:24):
benefit because this like, let'ssay they're 50 years old, they
want to retire at 60 years old.If one were to pass Mhmm. Then
the surviving spouse would bedisadvantaged because the person
that died, that's ten years ofincome that they could have
lost. Yeah. Or that they wouldhave lost, and they have to kind
of make up that gap.
So in that situation, it's like,okay, well this is why people
(03:45):
have term life insurance, but Ithink people are missing the
boat with term life insurance,and here's why.
David (03:48):
Okay.
Mike (03:49):
You can use other forms of life insurance that generate a
cash value while also coveringthe death benefit for that
season. It's through permanentlife insurance, specifically
indexed universal lifeinsurance. And this is usually
what people talk about when theytalk about manipulating life
insurance.
David (04:04):
Okay.
Mike (04:05):
So let's say you're 50 years old and you're gonna put
in X amount of money each yearfor, let's say, five years.
Okay? In the fifth year so you ahigh corridor, so you have a
high death benefit. So you putin $60,000, let's say, in one
year in your life insurancepolicy, and there's a 600,000
(04:29):
death benefit. Okay.
I'm making up numbers. This isnot illustrative at all. I just
I wanna show you there's a largegap between how much cash you
put in and that there's also alarge amount of death benefit.
So if you put in 60 ks andthere's a huge death benefit
now, you're gonna pay premiumsfor that.
David (04:47):
Because the corridor is so large. Yeah. Bigger the
corridor, the bigger thepremium.
Mike (04:50):
There's a high risk now to the insurance company if you
were to pass that a couple ofweeks later. Ugh. You know,
they're gonna have Right, to pay
David (04:57):
right.
Mike (04:57):
And maybe the odds are in the insurance company's favor,
but you can still get hit by abus. Mhmm. That happens,
unfortunately. Yeah. So so youhave to understand that first
part of it, but then as youcontinue to fund it, so 60 k, 60
k, 60 k in the fifth year,you've got over 300,000 or
300,000, I guess, thatsituation, is now in there, but
your 600 ks death benefit isflat.
(05:20):
So now the corridor has shrunksignificantly, the cost of
insurance has shrunksignificantly.
David (05:25):
Okay.
Mike (05:26):
And then at that point, you could say, we don't really
need the death benefit anymoreat this point, we're close
enough to retirement. You couldthen try to drop the death
benefit, so re illustrate thepolicy to get then that death
benefit to be as close to the300 ks as possible. Do you see
how this works?
David (05:42):
Okay.
Mike (05:43):
You're not manipulating it, you just have to follow
certain regulatory guidelines sothat you don't create a taxable
event with your life insurancepolicy so that there's a smaller
fee.
David (05:57):
Okay.
Mike (05:58):
If done correctly, usually by year ten, you can have
reasonable growth potential withlittle to no fees. When I say
little to no fees, let's be verycareful about that. All life
insurance has fees. But if youstructure it correctly, there
are certain policies that mightgive you like an extra bonus or
a kickback a little bit in likethe eleventh year, intended to
(06:19):
offset fees. So it's like a net,near net zero fee, if you
structure the policy right.
There's a lot of nuance in here.I'm not quoting any products,
any companies, I'm just sayinghow it generally works. Okay?
David (06:30):
Okay.
Mike (06:32):
So now, just imagine for a moment, you've covered the death
benefit you really needed duringthe time that you needed, you
put money into this thing for acouple of years, and then when
you start to retire, the deathbenefit's so small and you've
got a way that it's kind ofcovering itself, you now have
this vehicle that has reasonablegrowth potential, can't go
(06:54):
backwards, and you've kind ofoffset the fees through just not
manipulating, but structuringthe policy correctly. Yeah.
That's how it should be done.It's often not. I'll tell you a
little secret about lifeinsurance.
The bigger the death benefit,the bigger the commission.
David (07:10):
I was just gonna say, how would the average person know
everything you've just saidThere's no way. To manipulate or
massage or
Mike (07:16):
I used to train insurance agents and financial advisors
how to structure life insurancecorrectly because they'd say,
Well, how are you doing? I'dshow them. They'd say, what? And
then so I would help them outbecause I would, you know, do
good, right? Help people.
They're gonna be helping peopleso we can pay it forward in that
sense.
David (07:34):
And these are the agents that are responsible
Mike (07:35):
These are the agents. The people that are supposed to,
like, they're licensed to knowthis stuff, yet it's so
complicated. I I think insuranceproducts are more complicated
than securities Mhmm. As ageneral rule. Mhmm.
And the securities license ismuch more difficult to get than
the insurance license. So if youstructure correctly, let's set
(07:55):
then the right expectations. Alife insurance policy, the cash
value in the index, universallife category, maybe it has
reasonable growth potential thatit may be able to keep up or
maybe outperform, maybe not.Just depends Mhmm. Of a bond
fund.
I think it's in that category ofperformance. That it'd be
(08:18):
reasonable to be near what thebond funds would do, and a lot
people will have, like, let'ssay, 40% of their assets in bond
funds. Well, if you wanted alife insurance component to
cover your death benefit for acouple of years to bridge that
gap, and then you want somethingthat could grow tax free, that
you could borrow against taxfree, that had the growth, the
net of fee, net of all thisnuance, growth potential, let's
(08:39):
say in ten to fifteen years,we're looking at the IRR, by the
way, the internal rate ofreturn, so a more honest
calculation of performance, itmight be more of like in the
bond fund category. Don't expectit to beat the stock market.
Mhmm.
That's not an appropriatecomparison at all. I mean, it'll
beat the stock market if themarkets crash and you don't lose
(08:59):
much money in this, but like,you're not looking forward to
that situation, that's a oneoff. Right? Whenever that
happens. So it's understandingthe rules, it's understanding
how to structure it, and it'sunderstanding how how to to fund
it.
And you gotta work with someonethat's not trying to get higher
(09:19):
commissions, that wants tostructure it correctly. Because
again, dropping the deathbenefit, structuring the payouts
in certain ways lowers thecommission. So that whole
integrity bit actually matters.
David (09:32):
Mhmm.
Mike (09:33):
Okay. So these are things to to consider with life
insurance. But if you look up myKipling articles on this, I
wrote to one's retirement planwith life insurance and the
other's how index universal lifeinsurance really works. You can
go to Kipling or Michael Decker,if you just search it in your
favorite search engine, you canfind these articles. But I talk
(09:54):
about then how if, fundedcorrectly, you can utilize life
insurance to then absorb a lotof the tax issues you might
experience with your RMDs orwith your IRA to Roth
conversions or with other taxplanning features that you might
not realize that would otherwisebe available.
So there are additionalcomponents. Just again, the
quick recap (10:12):
don't expect it to beat the stock market. That's
not appropriate. Life insuranceis not an investment. Yes,
there's a cash component to it,but you're using it for
investment or for insurancepurposes.
And then understand it could bea good feature for, like, a bear
market protocol, taking incomeout when the markets crash. It
could be a good feature to helpyou with your tax planning. It
(10:34):
could be a good feature in a lotof different situations, but it
needs to be defined as it is,not as people want it to look
like. That's all the time we'vegot for today's show. If you
enjoyed the show, considertelling a friend, leaving a
rating, and most importantly,that you are subscribed to it so
that you don't miss a thing.
(10:54):
For more resources, including acopy of my book, on demand
courses, and so much more, justgo to www.retireontime.com. If
you want help putting yourretirement plan together, go to
retireontime.com and click thebutton that says get started.
But seriously, from all of ushere at Kedrick Wealth, we wanna
thank you for spending yourtime, your most precious asset
with us today. We'll see you inthe next episode.
So now, just imagine for a moment, you've covered the death
benefit you really needed duringthe time that you needed, you
put money into this thing for acouple of years, and then when
you start to retire, the deathbenefit's so small and you've
got a way that it's kind ofcovering itself, you now have
this vehicle that has reasonablegrowth potential, can't go
(00:22):
backwards, and you've kind ofoffset the fees through just not
manipulating, but structuringthe policy correctly. Welcome to
how to retire on time, a showthat answers your retirement
questions. We're here to movepast that oversimplified advice
you've heard hundreds of times.Instead, we do wanna dive into
the nitty gritty because, well,it matters. There's no such
(00:43):
thing as a perfect investmentproduct or strategy.
Heck, there's no such thing as aperfect or riskless retirement.
That's why these details matter.Text your questions to (913)
363-1234, and we'll feature themon the show. David, what do we
got today?
David (00:57):
Hey, Mike. How do you manipulate life insurance so
that the cash value growsbetter? Yeah. Sounds like a
trick question. Who who canmanipulate?
The life the insurance companiesare too smart to manipulate it.
Is that fair to say?
Mike (01:12):
They're not manipulated. I think it's more about
understanding how to shop.
David (01:18):
Okay.
Mike (01:20):
And here's what I mean. If you want a million dollars in
term life insurance, you'regonna pay X. If you want
2,000,000 in life insurance,you're gonna pay around 2 x.
Right? It's real simple.
You are paying a certain premiumfor the risk the insurance
(01:40):
company has inherited or takenon, with the odds being in the
insurance company's favor. Youwith me so far?
David (01:48):
Mhmm. Yes. Yes.
Mike (01:49):
Okay. The reason why I think the word manipulated is in
here is because according to theIRS code, I think it's 7702,
line seventy seven zero two, ittalks about how life insurance,
if funded correctly, can growtax free, you can borrow against
it without paying taxes, andwhen the death benefit hits,
(02:10):
when you die, then it kind ofcleans up all of the policy and
then pays the beneficiaries taxfree. So a lot of people will
use life insurance as a part oftheir plan, whether it's their
financial plan when they're intheir thirties, forties, and
fifties, or in their retirement,if they've got their, you know,
(02:32):
fifties, sixties, seventies,eighties, or so on, to do a lot
of cool things. The problem withit though is with life
insurance, the higher the deathbenefit, the more cost of
insurance you're gonna pay.
David (02:49):
Okay. And that's sort of a general rule, that's a
standard
Mike (02:53):
Well, yeah, if you die, they're gonna pay out a high
premium. Yeah. So the questionis, you have to have what's
called a corridor. It's thedifference between the cash
value and the death benefit.
David (03:02):
Okay.
Mike (03:03):
The smaller the corridor, the less risk the insurance
company is taking, which meansthe less premium or cost of
insurance you're gonna have.Okay? So life insurance is not
an investment. That's the firstthing we need to discuss. Okay.
However, I have seen many peoplewho say, Well, we want a death
(03:24):
benefit because this like, let'ssay they're 50 years old, they
want to retire at 60 years old.If one were to pass Mhmm. Then
the surviving spouse would bedisadvantaged because the person
that died, that's ten years ofincome that they could have
lost. Yeah. Or that they wouldhave lost, and they have to kind
of make up that gap.
So in that situation, it's like,okay, well this is why people
(03:45):
have term life insurance, but Ithink people are missing the
boat with term life insurance,and here's why.
David (03:48):
Okay.
Mike (03:49):
You can use other forms of life insurance that generate a
cash value while also coveringthe death benefit for that
season. It's through permanentlife insurance, specifically
indexed universal lifeinsurance. And this is usually
what people talk about when theytalk about manipulating life
insurance.
David (04:04):
Okay.
Mike (04:05):
So let's say you're 50 years old and you're gonna put
in X amount of money each yearfor, let's say, five years.
Okay? In the fifth year so you ahigh corridor, so you have a
high death benefit. So you putin $60,000, let's say, in one
year in your life insurancepolicy, and there's a 600,000
(04:29):
death benefit. Okay.
I'm making up numbers. This isnot illustrative at all. I just
I wanna show you there's a largegap between how much cash you
put in and that there's also alarge amount of death benefit.
So if you put in 60 ks andthere's a huge death benefit
now, you're gonna pay premiumsfor that.
David (04:47):
Because the corridor is so large. Yeah. Bigger the
corridor, the bigger thepremium.
Mike (04:50):
There's a high risk now to the insurance company if you
were to pass that a couple ofweeks later. Ugh. You know,
they're gonna have Right, to pay
David (04:57):
right.
Mike (04:57):
And maybe the odds are in the insurance company's favor,
but you can still get hit by abus. Mhmm. That happens,
unfortunately. Yeah. So so youhave to understand that first
part of it, but then as youcontinue to fund it, so 60 k, 60
k, 60 k in the fifth year,you've got over 300,000 or
300,000, I guess, thatsituation, is now in there, but
your 600 ks death benefit isflat.
(05:20):
So now the corridor has shrunksignificantly, the cost of
insurance has shrunksignificantly.
David (05:25):
Okay.
Mike (05:26):
And then at that point, you could say, we don't really
need the death benefit anymoreat this point, we're close
enough to retirement. You couldthen try to drop the death
benefit, so re illustrate thepolicy to get then that death
benefit to be as close to the300 ks as possible. Do you see
how this works?
David (05:42):
Okay.
Mike (05:43):
You're not manipulating it, you just have to follow
certain regulatory guidelines sothat you don't create a taxable
event with your life insurancepolicy so that there's a smaller
fee.
David (05:57):
Okay.
Mike (05:58):
If done correctly, usually by year ten, you can have
reasonable growth potential withlittle to no fees. When I say
little to no fees, let's be verycareful about that. All life
insurance has fees. But if youstructure it correctly, there
are certain policies that mightgive you like an extra bonus or
a kickback a little bit in likethe eleventh year, intended to
(06:19):
offset fees. So it's like a net,near net zero fee, if you
structure the policy right.
There's a lot of nuance in here.I'm not quoting any products,
any companies, I'm just sayinghow it generally works. Okay?
David (06:30):
Okay.
Mike (06:32):
So now, just imagine for a moment, you've covered the death
benefit you really needed duringthe time that you needed, you
put money into this thing for acouple of years, and then when
you start to retire, the deathbenefit's so small and you've
got a way that it's kind ofcovering itself, you now have
this vehicle that has reasonablegrowth potential, can't go
(06:54):
backwards, and you've kind ofoffset the fees through just not
manipulating, but structuringthe policy correctly. Yeah.
That's how it should be done.It's often not. I'll tell you a
little secret about lifeinsurance.
The bigger the death benefit,the bigger the commission.
David (07:10):
I was just gonna say, how would the average person know
everything you've just saidThere's no way. To manipulate or
massage or
Mike (07:16):
I used to train insurance agents and financial advisors
how to structure life insurancecorrectly because they'd say,
Well, how are you doing? I'dshow them. They'd say, what? And
then so I would help them outbecause I would, you know, do
good, right? Help people.
They're gonna be helping peopleso we can pay it forward in that
sense.
David (07:34):
And these are the agents that are responsible
Mike (07:35):
These are the agents. The people that are supposed to,
like, they're licensed to knowthis stuff, yet it's so
complicated. I I think insuranceproducts are more complicated
than securities Mhmm. As ageneral rule. Mhmm.
And the securities license ismuch more difficult to get than
the insurance license. So if youstructure correctly, let's set
(07:55):
then the right expectations. Alife insurance policy, the cash
value in the index, universallife category, maybe it has
reasonable growth potential thatit may be able to keep up or
maybe outperform, maybe not.Just depends Mhmm. Of a bond
fund.
I think it's in that category ofperformance. That it'd be
(08:18):
reasonable to be near what thebond funds would do, and a lot
people will have, like, let'ssay, 40% of their assets in bond
funds. Well, if you wanted alife insurance component to
cover your death benefit for acouple of years to bridge that
gap, and then you want somethingthat could grow tax free, that
you could borrow against taxfree, that had the growth, the
net of fee, net of all thisnuance, growth potential, let's
(08:39):
say in ten to fifteen years,we're looking at the IRR, by the
way, the internal rate ofreturn, so a more honest
calculation of performance, itmight be more of like in the
bond fund category. Don't expectit to beat the stock market.
Mhmm.
That's not an appropriatecomparison at all. I mean, it'll
beat the stock market if themarkets crash and you don't lose
(08:59):
much money in this, but like,you're not looking forward to
that situation, that's a oneoff. Right? Whenever that
happens. So it's understandingthe rules, it's understanding
how to structure it, and it'sunderstanding how how to to fund
it.
And you gotta work with someonethat's not trying to get higher
(09:19):
commissions, that wants tostructure it correctly. Because
again, dropping the deathbenefit, structuring the payouts
in certain ways lowers thecommission. So that whole
integrity bit actually matters.
David (09:32):
Mhmm.
Mike (09:33):
Okay. So these are things to to consider with life
insurance. But if you look up myKipling articles on this, I
wrote to one's retirement planwith life insurance and the
other's how index universal lifeinsurance really works. You can
go to Kipling or Michael Decker,if you just search it in your
favorite search engine, you canfind these articles. But I talk
(09:54):
about then how if, fundedcorrectly, you can utilize life
insurance to then absorb a lotof the tax issues you might
experience with your RMDs orwith your IRA to Roth
conversions or with other taxplanning features that you might
not realize that would otherwisebe available.
So there are additionalcomponents. Just again, the
quick recap (10:12):
don't expect it to beat the stock market. That's
not appropriate. Life insuranceis not an investment. Yes,
there's a cash component to it,but you're using it for
investment or for insurancepurposes.
And then understand it could bea good feature for, like, a bear
market protocol, taking incomeout when the markets crash. It
could be a good feature to helpyou with your tax planning. It
(10:34):
could be a good feature in a lotof different situations, but it
needs to be defined as it is,not as people want it to look
like. That's all the time we'vegot for today's show. If you
enjoyed the show, considertelling a friend, leaving a
rating, and most importantly,that you are subscribed to it so
that you don't miss a thing.
(10:54):
For more resources, including acopy of my book, on demand
courses, and so much more, justgo to www.retireontime.com. If
you want help putting yourretirement plan together, go to
retireontime.com and click thebutton that says get started.
But seriously, from all of ushere at Kedrick Wealth, we wanna
thank you for spending yourtime, your most precious asset
with us today. We'll see you inthe next episode.
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