Infinite Banking Concept

[Full Throttle]

Let's say you have a non-direct recognition contract with $100,000 in cash surrender values.

Your interest and dividends are based on that same $100,000... regardless of any loans. It will continue to compound over time.

Just like owning a home - your home would appreciate (or depreciate) regardless of the total amount of loans you have outstanding against the property.

But most people don't have such an asset working for them in their life. They save to spend... or they borrow to spend and then pay it back.

The sooner one can get that compounding going on in their lives on an uninterrupted basis, the more wealth one can have.

In regards to the death benefit... wouldn't that money have been used to pay off debts anyway - regardless of who the finance company is? This time, the lender is 'in house'... that's all.

If "save your money and spend it" = arbitrage, then we agree. However, that in itself is nothing unique to life insurance.

Life insurance has some unique features that make it good, and that's why I own some. The arbitrage element has never been a practical reason to own it for me (yet) as I can find loans for less than the life insurance company charges. However, I own it for the flexible nature, the fact that it should produce a higher return than my savings without downside risk, and most importantly, for the death benefit.

At least in the current environment, I think telling people they should own life insurance because they can "save their money and spend it too" is misleading. It's not unique to life insurance. I do think there are plenty of other reasons to own permanent life insurance from a financial planning standpoint.

 

[DHK]

We're almost there FT! lol

The reason I bring up "save and spend" is that most, if not all financial planners ignore the fact that most people still need to spend money in the future.

They'll buy cars, computers, braces, vacations, home improvements, etc., etc., etc.

What would most financial planners say? They'll say "Which is more important: your 'need' or your retirement?"

I say "Both are important. Live for today and save for tomorrow... all at once."


You're right. Collateralizing is not unique to life insurance. Any bank or credit union will let you collateralize a CD or savings account to fund a secured loan.

It's about all the additional features of life insurance... AND the need for a death benefit that make it all work. If there's no need for a death benefit... then this concept is moot.

If I sold life insurance ONLY for "infinite banking"... I think it's less efficient than using a savings account at a bank - at least for the short term.

I actually wrote about this concept before I ever HEARD of "infinite banking". The purpose was to re-build credit and savings. It wasn't until much later that I learned how it could be used with Life Insurance.

Make Money, (re)Build credit and build your savings accounts - Banking and Finance - Credit InfoCenter Forums

 

[Full Throttle]

We're almost there FT! lol

The reason I bring up "save and spend" is that most, if not all financial planners ignore the fact that most people still need to spend money in the future.

They'll buy cars, computers, braces, vacations, home improvements, etc., etc., etc.

What would most financial planners say? They'll say "Which is more important: your 'need' or your retirement?"

I say "Both are important. Live for today and save for tomorrow... all at once."


You're right. Collateralizing is not unique to life insurance. Any bank or credit union will let you collateralize a CD or savings account to fund a secured loan.

It's about all the additional features of life insurance... AND the need for a death benefit that make it all work. If there's no need for a death benefit... then this concept is moot.

If I sold life insurance ONLY for "infinite banking"... I think it's less efficient than using a savings account at a bank - at least for the short term.

I actually wrote about this concept before I ever HEARD of "infinite banking". The purpose was to re-build credit and savings. It wasn't until much later that I learned how it could be used with Life Insurance.

Make Money, (re)Build credit and build your savings accounts - Banking and Finance - Credit InfoCenter Forums

Not sure I follow your point about traditional financial planning not taking into account future spending. I save some money (for those expenses), I spend the rest. Either way, I have the same amount of cash flow whether or not I follow the IB system.

I still think using life insurance for arbitrage is something that won't get used all that often, since there are lower cost financing options available in most situations. That is the main message of the IB system and I think it's misleading.

I think permanent life insurance for the death benefit, flexibility, and an efficient use of cash reserves does make a lot of sense.

 

[scagnt83]

I have heard Nelson Nash speak before (in a small interactive setting) and it was very interesting. He does take the concept to the extreme at times. He does say to put as much of your paycheck as you can... lol.

But the overall concept is sound if you use it for larger purposes (or to supplement retirement income).


The main advantage is the arbitrage on the loan and the flexibility.

Back when WL dividends were a lot higher (because interest rates were a lot higher), the concept worked a lot better using WL. If it wasnt an arbitrage it was at least a wash.


These days a UL policy is the best to use.

FT,
You say that you can get a lower personal loan.... ULs often have loan rates of 3%-5%... If you are getting lower rates than that you must have an 800 credit score...

The loan feature is made available for a reason. That reason is to keep your access to the CV tax-free. If it wasnt classified as a Loan all you could do is withdraw the Basis tax-free.

Many UL/IUL policies have a "wash loan" option. So you have a net 0% loan if you dont want to try to arbitrage.


You say that you can do the same thing with a collateralized personal loan. But there is nothing else really that has the flexibility that a life policy has. You could use a CD or Bonds, but they are not liquid like a life policy is. And forget arbitrage using a CD (or even a wash). And home equity is not liquid like a life policy is.

Even if there is something, the process is not as easy and seamless (and guaranteed) like a permanent life policy is.


Its about creating a bucket of money that you can access on a tax-free basis. You can choose a wash loan or take a chance at arbitrage. You can choose to pay back the loan or you can choose not to. You can choose to loan out more if its available.

Its an asset that guarantees you choices and flexibility like no other financial product or combination of financial products can.
- - - - - - - - - - - - - - - - - -

I still think using life insurance for arbitrage is something that won't get used all that often, since there are lower cost financing options available in most situations. That is the main message of the IB system and I think it's misleading.

So you can find a short term personal loan for under 5%??

How about for 0%?????

Because a UL/IUL can guarantee that for the rest of your life....

 

[Larry Tew]

The process behind ibc is creating a personal finance for loans retirement income ect. The reason why you choose a loan from wl verses traditional means is OPPURTUNITY costs. Your cash value continues to grow Now if you pay back the loan with a percent higher. You gain more dividends to buy more paid up additions creating more death benefit which results in more dividends the next year The though is you capture the lost interest you would have paid fo the bank Sorry its a little jumbled on the phone

Not to nitpick, but there are opportunity costs on ANY loan interest paid NO MATTER who you pay it to... bank, life insurance company, etc.

The fact that your cash values continue to grow is 100% irrelevant to the source of the loan. Ideally, you want to pay the loan back as timely as reasonably possible no matter where it came from UNLESS you are using the borrowed funds for arbitrage... and most of us who strongly promote permanent life insurance don't push that issue as well as we don't push - and even discourage home equity harvesting and stuff like that.

 

[Full Throttle]

I have heard Nelson Nash speak before (in a small interactive setting) and it was very interesting. He does take the concept to the extreme at times. He does say to put as much of your paycheck as you can... lol.

But the overall concept is sound if you use it for larger purposes (or to supplement retirement income).


The main advantage is the arbitrage on the loan and the flexibility.

Back when WL dividends were a lot higher (because interest rates were a lot higher), the concept worked a lot better using WL. If it wasnt an arbitrage it was at least a wash.


These days a UL policy is the best to use.

FT,
You say that you can get a lower personal loan.... ULs often have loan rates of 3%-5%... If you are getting lower rates than that you must have an 800 credit score...

The loan feature is made available for a reason. That reason is to keep your access to the CV tax-free. If it wasnt classified as a Loan all you could do is withdraw the Basis tax-free.

Many UL/IUL policies have a "wash loan" option. So you have a net 0% loan if you dont want to try to arbitrage.


You say that you can do the same thing with a collateralized personal loan. But there is nothing else really that has the flexibility that a life policy has. You could use a CD or Bonds, but they are not liquid like a life policy is. And forget arbitrage using a CD (or even a wash). And home equity is not liquid like a life policy is.

Even if there is something, the process is not as easy and seamless (and guaranteed) like a permanent life policy is.


Its about creating a bucket of money that you can access on a tax-free basis. You can choose a wash loan or take a chance at arbitrage. You can choose to pay back the loan or you can choose not to. You can choose to loan out more if its available.

Its an asset that guarantees you choices and flexibility like no other financial product or combination of financial products can.
- - - - - - - - - - - - - - - - - -


So you can find a short term personal loan for under 5%??

How about for 0%?????

Because a UL/IUL can guarantee that for the rest of your life....

Good points. That was helpful.

You say that you can get a lower personal loan.... ULs often have loan rates of 3%-5%... If you are getting lower rates than that you must have an 800 credit score...

The only debt we have is our mortgage and an auto loan at 0%. The only reason we went with the car loan is I figured out the discount we gave up to get the financing and after running the numbers, decided I could beat the discount rate. Arbitrage! That being said, I see your point.

Its about creating a bucket of money that you can access on a tax-free basis. You can choose a wash loan or take a chance at arbitrage. You can choose to pay back the loan or you can choose not to. You can choose to loan out more if its available.

I am with you 100% here. That is one reason I am a big believe in personally owned permanent life insurance.

So you can find a short term personal loan for under 5%??

How about for 0%?????

Because a UL/IUL can guarantee that for the rest of your life....

I could not find a short term loan under 5%. Never had to, guess that means I keep too much cash that could be put to more efficient use. One of my permanent policies does have the option to switch between variable rate and direct 0% loans. The 0% would basically be just the same as pulling it out of a savings account, now the money is gone.

This one reason I like this forum (the other being prospecting avoidance today, which was planned). You put out what you think is correct, then let others hammer away at it. If it stands, you are more convicted. If not, you learn something new. This thread certainly gave me some new perspectives I had not thought of before. Thanks to SCAgnt, DHK, and Larry. Have a great 4th!

 

[DHK]

Just as a final link, you might want to check out the 'prospecting video' here:

http://www.prsprogram.com/prospectingvideo/

username & password are both: prs

Or even this one by former BTID guy "John Cummuta":

The Banker's Secret to Permanent Family Wealth

 

[scagnt83]

I could not find a short term loan under 5%. Never had to, guess that means I keep too much cash that could be put to more efficient use. One of my permanent policies does have the option to switch between variable rate and direct 0% loans. The 0% would basically be just the same as pulling it out of a savings account, now the money is gone.

And what efficient use does liquid cash serve? Dont get me wrong, cash is king. But cash is a depreciating asset. Why not have a liquid cash account that is not depreciating?

If it costs nothing to access the CV in a policy, then what is wrong with using it like a cash account for large purchases? (cars, remodels, new furniture, etc)

It grows tax-free at a decent rate, will never loose value, & is liquid for when you need it. Instead of keeping a bunch of money in Cash, keep it in the PI so it will grow; its liquid like cash for when you need it.

And yes, the wash loans are basically like pulling it out if a savings account. But its a savings account that grows at 3%-5% long term.

But if you do need a loan for a large purchase and have the funds in CV, choosing the wash loans (0%) makes a lot more sense than going to the bank and paying 4%-7%.


One hurdle with the IB concept is that it is delayed gratification.
Most people who are able to practice the concept already have that kind of cash on hand (like yourself).
You just have to realize that shifting a portion of your cash assets to PI is just financially advantageous.


The biggest problem I have with the concept are agents that paint this huge rosy picture of buying power with a prospect who can only contribute $50 or $100 per month...
It takes cash flow and discipline to be done correctly.

 

[Larry Tew]

Infinite Banking System is a great concept, however I would rather go a different route to sell the same product as sold in the Infinite Banking System. I would rather do it the Patrick Kelly way. His book "The Retirement Miracle" is absolutely the best hand out to a prospect. If a prospect reads it, it will double your chances of selling the prospect.

Bye Hoppy. Posting under 2 user accounts is a "bannable" offense.

You also spam under Hopwood04. Hopefully you will follow the rules at your next stop.

 

[scagnt83]

But Larry, what a great prospecting concept he had... "go read this 150 page, $15 book I bought you, that is about insurance taxes & retirement and call me when you have seen the light".... lol