Buyer Beware; The Ugly Truth About the Secret 770 Account

Ross Quade | Life Insurance | 4 Aug, 2015 | No Comments

Currently in circulation are talks about an elusive and secret “770 Account”. According to advertisements, these accounts allow you to retire 100 percent tax-free, and you do not need to report it to the IRS. Additionally, auditors are unable to see it, and the returns are 30 to 40 times more than with a C.D. The best part is that you may withdraw money from it whenever you want. It is supposedly a secret bank account utilized exclusively by the wealthy, including presidents. These accounts are talked about as a well-kept secret by the government and banks. Unfortunately, when something sounds too good to be true it likely is. It is critical that you always conduct research before involving yourself in an investment to ensure that you fully understand how it works, as well as the fees and risks that may ensue because of it. When it comes to a 770 account, once you tear away the marketing ploys and schemes all that it is, is a type of whole life insurance policy.

Why 770 Accounts Are Not Worth the Hype

Although 770 accounts are not a scam, they will not do anything to help your monetary situation. This account is named after its IRS code—7702, which is the code used for life insurance contracts. In essence, this means that 770 accounts allow you to use a life insurance contract as a type of savings account. Once you’ve funded the account with a sufficient amount of capital, you may withdraw the money tax-free. Nonetheless, when withdrawing money from a 770 account, all you are doing is borrowing money from it, and not actually making a disbursement. This means that taking out money from the 770 is a loan, and so you must eventually return it. However, this is nothing new or unique. In fact, the IRS states that loan proceeds are not taxable income no matter whether they are from a credit card cash advance, a life insurance contract, a car loan, etc.

 

How the IRS Still Profits From a 770 Account

Almost every type of interest is taxable income, besides a couple of exceptions, such as from an IRA or 401(k) account. This indicates that the IRS still makes a profit on 770 accounts the second that you start making distributions, since they are considered taxable income. Brett Goldstein, who is the director of retirement planning at AIP in New York, stated that 770 accounts are solely based on the money that you borrow from a life insurance policy in order to make a purchase. You are essentially paying yourself back instead of paying the bank back.

 

Why You’ll Lose Out By Opening a 770 Account

770 accounts are just another type of permanent life insurance, and life insurance is weighed down with fees. This is why agents love to sell this kind of policy, as they can make huge commissions on it. Life insurance is an extremely expensive way of attempting to manage your assets, as you have to deal with the operating costs of the company, as well as the agents. This is why a 770 account is a poor way to build wealth unless you want to protect your loved ones.

 

When Opening a 770 Account is a Good Idea

The only time that it makes sense to open a 770 Account, otherwise known as a permanent life insurance policy, is when you’ve already accumulated wealth, and you want to preserve it for your family after you pass away. However, it in no way will make you wealthy like many advertisements for it claims. If you do see advertisements claiming that the 770 Account is a wondrous well-kept secret then know that this is only an agent’s way of trying to make his or her commission. 770 Accounts are simply not worth your time or money, as you could easily make more profit from investing in the stock market, then you could with investing your money this way.

 

The Madoff-Technique

The reason as to why the advertisements for 770 Accounts work so well is that they utilize a well-known psychological trick called the Madoff Technique. This technique makes you feel as though you are getting let into an exclusive club of people by claiming that the 770 Account is the secret of wealth that only the elite knows about. Of course, this is not the case since life insurance has been around for more than 100 years. In fact, the name “770 Account” is just made up by life insurance sellers to hype up whole life insurance policies without actually using the term “life insurance”. They do this to attempt to sell permanent life insurance as a type of investment when in fact it is a terrible investment to make.

 

You Have to Trust an Insurance Agent With Your Money

For a 770 Account to work, you need a properly structured permanent life insurance policy. You would have to find a life insurance agent that you can trust with your money. However, life insurance agents do not always have your best interest at heart. Some agents may be trying to make the most commission possible, which causes them to have a significant conflict of interest. It is equivalent to asking that a stockbroker purchase an index mutual fund and then never make a transaction again. It is always in your best interest to pick a life insurance agent that you can trust and who will always be truthful with you. Honest agents do exist.

 

Conclusion

770 accounts are a glorified form of whole life insurance, and most financial experts recommend that you avoid whole life entirely unless you have a dependent with special needs or you have a substantial amount of net worth. Instead, it is best to put your money into an IRA or 401(k) account.

 




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