A Well-Guarded Secret Revealed

Successful investing in the stock market is uncertain, and net losses can sometimes exceed net gains. So-called traditional safe investments, such as CDs, treasury bonds, municipal bonds and the like, may offer only paltry returns.

Columns From: 4/1/2006 Modern Machine Shop,

Successful investing in the stock market is uncertain, and net losses can sometimes exceed net gains. So-called traditional safe investments, such as CDs, treasury bonds, municipal bonds and the like, may offer only paltry returns.

However, there is an investment that can match the potential high returns of successful stock market investors, yet has the prime characteristic (no risk) of traditional safe investments.

There’s a good chance you have never heard of a life settlement, also known as a Transferable Insurance Policy (TIP). To understand how a TIP works, let’s use an example.

Joe is 68 years old and owns a life insurance policy with a $500,000 death benefit and a $60,000 cash surrender value (CSV). Joe would like to stop paying premiums. Of course, he can cancel the policy at any time and get the $60,000 CSV from the insurance company.
However, with a TIP, an investor (really a group of investors) buys Joe’s policy for $150,000. This amount is immediately paid in cash to Joe. The investors now own the policy, and they will receive the $500,000 death benefit when Joe dies.

Let’s say you are one of the investors and your investment is $100,000 in a diversified portfolio of TIPs. One of the TIPs will be a fractional interest (for example, 3 percent or $15,000) in Joe’s $500,000 policy. This TIP will pay you exactly $15,000 when Joe dies. This includes principal, amount invested and profit. Insurance companies love when people like Joe terminate their policies and it’s easy to see why. When that happens, the insurance company pays a mere $60,000 for the CSV and is off the hook for a $500,000 death benefit.
Terminated policies are highly profitable for insurance companies. Of course, they want to keep the entire life settlement industry a secret. Why? Because investors have found a way to help the Joes of the world and at the same time stand tall in the profit shoes of the insurance companies.

As a TIP investor, you can enjoy an average rate of return of 16.28 percent per year; not worrying about the market being volatile or whether it goes up or down; the guaranteed return of your principal, as well as your profit; and keeping 100 percent of the profit, because there are no fees or costs when you buy a TIP.

What are the tax consequences of your TIP profits? There are only two simple rules you have to remember: 1) The tax on your profit is deferred until you actually receive your principal and profit; and 2) Your profit is taxed as ordinary income.

Even the big-hitter investors are buying life settlements. The following is a quote from the May 18, 2005 issue of the Wall Street Journal titled, “Moving the Market. . .”:

  • “AIG [American International Group Inc., the insurance giant] has bought fewer than 1,500 policies since 2001…”
  • “A few years ago, Berkshire Hathaway Inc., the investment vehicle of billionaire investor Warren Buffett, began buying life settlements, according to securities filings.”

Ask your professional advisor to check out senior settlements for your own personal investments and qualified plan funds.

The company offering the senior settlements/TIPs discussed in this article is a public company, trading on the NASDAQ. The average rate of return on investments has been 16.28 percent per year throughout the company’s 14-year operating history. If you want to make a killing on your investments, then this is not for you. However, if a set rate of return, with no market risk is of interest to you (or your IRA, 401(k) or other qualified plan) then fax me (847) 674-5299 your name, address, phone numbers (business/home/cell) and the estimated amount to invest (the minimum investment is $50,000).

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