When in Financial Calculators, Double Click on the word of the second calculator you want and it will come up.   For example, if you have the Rate Calculator up and now you want Future Value, just click on “Future” inside of the Rate Caclulator and you’ll get the Future Value Calculator.

Additional Income Definition:  “Net after taxes but before qualified plan deduction”.  For example, if someone is earning $150,000 they have $30,000 of mortgage interest deductions and $10,000 of charitable deductions, then Additional Income is $110,000 for the Qualified Plan Calculator and if they are putting $15,000 into their QP, then Additional Income is $95,000 for Accumulation and Distribution Calculator.  Another way to put this is “gross taxable income minus deductions plus qualified plan contribution”.  For example: $150,000 of gross income minus $30,000 of deductions plus $16,500 of qualified plan contribution means you’d put $136,500 in the “additional income” box.

Want to increase your productivity by 30%? Purchase a second monitor so you can use two screens with your computer.  You’ll want to have a video card for a lap top or a USB to VGA adapter…then select properties and “extend windows” onto that second screen so you can run your illustration software on one screen and the Truth Concepts calculator on the other. 

Two screens make presentations more effective, save delays on jumping between applications which add up to alot of time when you repeat them multiple times per day.  With dual displays, your mouse sweeps from one screen to the other, allows for multitasking and side by side comparisons.  A second screen is a cost effective, easy way to boost productivity.

Hello and welcome to a tutorial on a new Truth Concepts tool called Life Insurance Values.  We’ll be having Todd Langford join us to show how you can use the Life Insurance Values tool to cut down the time you spend copying and pasting information into the Truth Concepts calculators and drastically show the whole truth about life insurance.  Go ahead Todd.

Thanks Kim.  The new tool as Kim said is called Life Insurance Values and right here under the Tools menu at the bottom we see Life Insurance Values.  And this is a place that we can loan 6 permanent life insurance policy illustrations and 4 term life insurance illustrations and all that information gets saved into the data file.  The idea behind it is that we can then pull information from this calculator into the other calculators while we’re working with a client so we don’t have to spend time copying and pasting information.  We can just put it in here save it open it up with the client and pull from these numbers in to a particular calculator as a particular calculator becomes appropriate.

So here I put in some information:  We need to have a start age, we need to have a description that will help us later when we need to figure out what we put in here and then also we need at least the premium values, the net cash value, and net death benefit.  We have the ability to put in some additional information withdrawals, loans, repayments, all of that could be done whatever you’ve done in the illustration you just copy that information and put it in here.  Now this tool also calculates a couple of additional columns automatically.  One of them is the Total IRR on Cash value and this is a running total many of you have seen this as an optional column you can include in  your illustrations where you could have the illustrations software calculate that for you.  Here, we’ve done it for you.  And what it does it’s got a running total of the Internal Rate of Return based on the cash value and we also have one based on the death benefit and what you’ll see in the two of them is on the death benefit we start with a 7000% in the start of this particular illustration and the IRR drops over time.  The opposite is true of the cash value it starts very low and increases over time, we start with negative 100% because we have zero cash value in the first year but the IRR appreciates and increases over time.  We have a third column here between the two of them it’s called Annual Rate of Return on Cash value and what it does is calculate the ROR on the cash value for every year without carrying the baggage from previous years.  Whereas the IRR calculation even when you get down here in the 10^th year it also has all the previous negative years that are weighing it down.  The annual RoR on Cash value looks at each year separately, we have a positive annual return on cash value here in the 4^th year of  .93%.  Where’d that come from what it means is if we started with the previous year’s cash value of 23902, we add 14200 to it, in order to end up with the 38,455 we have at the end of the year, it means that those dollars earned .93% in that particular year, so every year is treated individually.  This calculation is actually used in a little while in another calculator which we’ll show in a while when we actually import it. 

For the purpose of learning I have a calculation here where I have not put in the net death benefit I put everything else but just as a review so you can see how to put these figures in.  If I pull up an illustration that I printed to adobe just to show you.  First thing I’m going to do is change the zoom on the screen to 75% to have an entire page on my screen. If I were to just click when it turns into an I bar and drag down it will highlight the entire illustration but I can’t use these numbers to paste into the software.  So what I do is go to the column which I’m looking for which in this case is a net death benefit column curser is an I bar I’m going to hold down the alt key and you’ll see a rectangle form in the middle of the I bar that’s one of the press my mouse down highlight just that one column right click somewhere in the blue area select copy then I can go back to the Life Insurance Values tool click on the death benefit right click and paste values.  I would encourage you to put every year in here.  If you put them all in here you’ll have whatever length of years you’ll need with that particular client in that calculator.  Back to my pdf with illustration, scroll to next page, hold down alt key hold down the mouse and highlight net death benefit column, right lick and copy paste values next 40 years.  I’ve got a this one named L95 $25,000 premium for 25 years.  I can close this screen and it saves the data file it doesn’t lose the information like with some of the other calculators.  So I can save it under a particular client name this information will also be stored in there.  As a way to shorten the process with the client we could Preload all the information in here, even though there’s no calculators it will shorten the timeframe.    And it will save all the data in the file with it. 

I’m going to open up a funding calculator so we can see how it pulls in.  Change the current age to 25 and projected age I’m just going to put age 70.  Now I want to pull in my life values so I’m just going to click on stored life insurance data it’s going to give me a list of everything I have currently loaded in the Permanent Life Insurance Value tool.  The one we were just working with is that L95 $25,000 premium for 25 years, I can we have the option of Interpolate these values, by clicking the interpolate right here  I can change that right here from 1Million to 2 Million let’s say and the software will automatically change everything to the new and you can do that on death benefit, based on premium we could change the premium scenario and say like on this one we put $25,000 in on premium it would basically double everything that was there.  The last thing we can do from an interpolation standpoint is based on in cash value I could put in a year that I want to hit a certain cash value so let’s say here in the 20th year I want to have a million dollars cash value and figure out what it would take to grow that cash value and adjust everything to have a million dollars of cash value in the 20^th year.  For this let’s just use the illustration as is and turn the interpolation off, pull in the illustration it will ask me if I want to replace the information that I already have, as a safety feature to make sure you don’t lose any data.  What year do I want the first year, typically that’s going to be the age of the start of the PLI illustration, but you may want to pull in say from age 50 and see what it’s going to be from there, you have the ability to do that, it’s going to pull in the information anything I had in there it pulled into the funding calculator.  I’m also going to pull in some term insurance into this calculator, again I could interpolate these numbers if I wanted to, I’m just going to use the 30 year level pre loaded into the Life Insurance Values.  It’s going to ask me again “Do I want to override the term that I have in the funding calculator” I don’t have any in there so yes I do.  I’m going to start at age 35 I can tell it over here to include the term insurance.  You can change the age to cancel term to cut it off at the point in time when the term insurance would be cancelled.  So you can see how easy it is just to pull that in, you can do this with any of the calculators that have any life insurance values.    

One of the things I mentioned earlier is that Annual Rate of Return column that we have on the Life Insurance Values worksheet.  What I want to do here is pull up one of the calculators that uses that directly.  That’s the borrowing Strategy Calculator.   I’ll show you how it works and why it’s important.  In this particular calculator, if I go to let’s say 35 years and I want this to illustrate a life insurance policy then I can put the information in by doing this I can put in 50000 premium even though our life insurance illustration is 25 I can put in 50. On the present value I’m not going to put in anything that would assume some existing cash value on the policy.   I’m going to load the PLI ROR’s, that rate of return we were talking about and we can pull in that ROR column and yes I want to overwrite the values I have here, I want to start at age 35, it pulled in that one column, it didn’t pull in any of the other columns, it pulled in my rate of return so then if I want to run an $50,000 illustration this end of year account balance.  And if I were to run a $50,000 this ROR column would match what I have.  Because it’s going to follow that permanent life insurance curve.  Here we have the information in (on left) here we have the results (right) and now we have a picture of what the life insurance illustration should actually look like.  With this new tool you can load the data in directly out of the pdf, some illustration software let’s you export to an excel sheet copy the columns and put them into the life insurance values tool and pull them into any calculator you want right in front of the client without a huge hassle.

How do I show a 50 year period but a 20 year Pay Down so that Distribution 1’s income is still based on Interest Only and Distribution 2’s income could for example, use a death benefit to improve cash flow and spend Interest and Principal but only for 20 years.  If I show a 50 year measurement of money the second person doesn’t run out at age 84, but I want to illustrate 50 years for both examples, but Distribution 2 running out in 20 yrs. 

Make the Illustration Period (Years) be 20 first.  Note you can also put 65 in place of 1 in the Year column so it shows 65-84 instead of 1-20.

Then turn off the automatic Pay Down calculation (click on the “PayDn” button on Distribution 2 so it is no longer blue).  Then change Illustration Period (Years) to 50 which will stretch out the illustration to 50 years and you will see that the Pay Down amount does not change so it runs out of money in the 20th year.

When importing the values from the tool to the Internal ROR calculator, take note that the IRR calculator AUTOMATICALLY adjusts the number of years for the illustration period.  This is because the values in the IRR calculator are all beginning of year and the values on the illustration are all end of year.

For example, you’ll see in your Life Insurance Values a table running 30 years, but it will show up as only 29 years under the IRR calculator.

The descriptions of the 4 “loan/withdrawal” source drop downs are as follows:

ACT CASH: removing money from the account via withdrawl

ACT LOAN:  borrowing against the account itself

ALT LOAN:  borrowing against another asset outside of the account

MKT LOAN:  borrowing from the market place, home equity, car dealership etc

This is Kim Butler and along with Todd Langford we are going to be going over the Truth Concepts calculator called the borrowing strategy.

What we are going to be showing today is the power of having the client pay themselves, just like they would the bank.  We’ll use a car loan as an example that is borrowed against the savings account and take a look at that versus marketplace loans like you’d receive from a bank and help the client understand the best place to borrow money.

Let’s look at this out over a 30 year time frame, so in illustration period I’ll put in 30.  We won’t be concerned about any existing dollars in the account let’s look at starting from now this individual’s going to save $20,000 a year and in this savings account they can earn 2.5% and that’s going to be taxable earnings we put a tax bracket in here of 30%.  What we can see is if he continues this savings at earnings and tax rate he’s going to end up at the end of 30 years with about $793,999.

 At this point let’s go ahead and add a loan to this.  I’m going to click on Loan/WD 1 and the amount, let’s say a car purchase so $30,000 we’ll purchase it in 3 years so not right away, we’ll purchase one vehicle and we’ll pay this back over 4 years.  Right now it’s showing us the loan but no loan interest because we haven’t put in the interest information. 

The next thing I’m going to do is go to the Loan/WD Payback rate and this is independent of whatever the rates are thats are being charged.  This is the rate that will determine the payment we pay back with.  What I’m going to start with is 8%.  If I do that, it’s going to show me a $9,000 payment on an annual basis that I would pay this loan back.  The Market Loan Rate this will be whatever the going rate is, let’s say for example that right now on car loans the bank is charging 8% and I would use 8%.  The Alternate Loan Rate, this might be a special that is going on like right now General Motors 2.9% rate.  If I put 2.9 in here, it will calculate the payment based on a 2.9% loan charge, and that’s going to be $8,253. 

What we see here is future account value stayed the same because the source of the loan was the Market.  We didn’t touch this account at all, we used the bank or whatever funding source that was available.  What if we were to take advantage of this loan rate like we talked about with General Motors?  If I change this source to the alternate loan it will use the 2.9 rate, since we chose a payback rate of 8%, the calculator will assume that 2.9% went to General Motors in this case, and any excess on that payment is going to go into this savings account and we see it in the Extra Payment Lost or Found column.  So we $1,006 each year for these four years.  The difference is rather than having $793,999 like we would have without this loan strategy, instead what we will have is $800,156.  What happened under this scenario we used a cheaper loan source, but paid it back based on the market rate and we got to reap the benefits of that difference in the payments, we were able to take advantage of the opportunity for a cheaper loan.

We would have another option here.  What if rather than using the 2.9% with General Motors, we chose to fund this ourselves, use this 2.5% asset here.   Whatever the earnings are, in this case the 2.5% if I take money out of here to fund it for myself I give up the ability to earn that 2.5%.  The result is exactly the same as if I had borrowed money at 2.5%.  So let’s see what happens.  If I change my source to Account Cash and rather than $1,009 in additional payment going in each year, we have $1,227 going in each year and the difference is we boosted this future value by about $1,500.  We end up with $801,506.  That’s where the difference is with this particular calculator.  As we create loans, start to finance things using our own assets, and finding the cheapest source for money, as long as we follow through the banking concept of paying our self back and paying ourselves the market rate or more, we’re going to be able to reap the benefit of those cheaper rates. 

We might decide maybe we want some discipline we could pay it back at 12% if I do that then it’s going to put additional dollars in here, it’s going to be $806,520.  This added another $5,000 over this timeframe just because we committed ot making payments at a higher rate.  You’ll notice we didn’t use any info over here in this box the Account Loan Rate.  The reason is with a savings account it does not have the ability to borrow money if we were ot use this account more like a life insurance policy then these items would come into play, Life Insurance policies have loan provision that come with it, and if we have a direct recognition company, then we might have a difference in what the earnings rate was overall on the life insurance on the borrowed side versus the non borrowed side.  So, this would give us the ability to adjust the earnings rate on the borrowed versus the non borrowed. 

Another option here would be to apply this excess payment we have directly to the loan first before going to the savings to see what type of impact that would have.  So I can do that by clicking Apply extra payment to the Loan.  What we see is not a big difference between the two.  Depending on the amount of the loan that will impact whether it’s going to be beneficial to apply the excess payment to the loan or not, and we can use this calculator to determine which is going to be best.

Another option that we have is we chose to do one loan.  Typically if we do a car loan we might do one of those every 4 years, therefore we can change the number of the loans and extend that out.  We could do this over the timeframe total of 6 cars.  It’ll put 6 total loans in here and we can see what type of impact that will have to our bottom line.  If we put 6 loans in here we end up in this case with $857,606 rather than $794,000.  We also have the opportunity to inflate these cars.  We can do 5 additional loans as many times as we want to in the space of whatever our illustration time is.

So what this calculator does in summary is illustrate the principles of banking both borrowing and paying back with varying interest rates, strategies, and money sources.  It enables us to show the client  different scenarios all summarized into one or one simple scenario.  This is a powerful calculator for showing how we can gain control over our own debt and the missing component when people are talking about getting control over their debt, is the part about paying it back. 

At our 2 day truth trainings we spend another hour or more on this calculator showing additional strategies, examples, and ways to use it.  So join us at Truth Concepts.com for one of those trainings, we look forward to seeing you there.

We’d LOVE to capture more of Norman’s stories like these below.  Please feel free to add yours or post a comment to add to one that is already here.