Author Topic: Infinite banking concept/Bank on yourself  (Read 11062 times)

Offline Ben Lacasse

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Infinite banking concept/Bank on yourself
« on: July 01, 2011, 12:43:56 PM »
A buddy of Mine lent me a book call the infinite banking concept.  It is about using divided paying life insurance as a retirement vehicle and in lets you get a loan against it instead of a bank.  There by paying your self back instead of a bank.  I'm not sure what to think.  I'm not that money savvy, Just a simple Marine.  Does anyone know anything about this stuff.  It seems good to go, that's why I'm not convinced.  Please only respond if you have real knowledge concerning this stuff, no "it seems to good o be true".  Thanks in advance.

Offline Mr. Bill

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Re: Infinite banking concept/Bank on yourself
« Reply #1 on: July 01, 2011, 01:05:45 PM »
I don't have any real knowledge (yet), but I did find a link that summarizes the concept:

How Infinite Banking Works

Offline Bubafat

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Re: Infinite banking concept/Bank on yourself
« Reply #2 on: July 01, 2011, 02:58:50 PM »
I also don't have any experience with them, but read a little about it:
http://forums.kiplinger.com/showthread.php?10496-Bank-on-Yourself-Infinite-Banking.../page5

It looks really complicated and is wrought with fees.  The fee based financial planners (i.e. they're not trying to sell me something) that I've spoken to have told me to keep your investments and insurance separate...i.e. stay away from whole life insurance or any other product that is like it.  If you have an insurance NEED, buy term life insurance.


Personally, unless you totally understand an investment...STAY AWAY!

Offline Bubafat

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Re: Infinite banking concept/Bank on yourself
« Reply #3 on: July 01, 2011, 03:00:49 PM »
If you're a marine you REALLY REALLY REALLY should look into the Thrift Savings Plan if you haven't already. 

http://www.tsp.gov

Offline mxitman

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Re: Infinite banking concept/Bank on yourself
« Reply #4 on: July 01, 2011, 03:10:35 PM »
I rather just save my money and not buy a new car every 4 years, I guess if you were in the market for life insurance it might be a bonus but I would never bank on it. Would be good for say an emergency, like an operation or hospital stay...not their example.

Offline Morning Sunshine

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Re: Infinite banking concept/Bank on yourself
« Reply #5 on: July 01, 2011, 03:21:49 PM »
I think this is what my husband wants to do.  I am leary of it.  sounds like a scamming the system; we get burned and the perpetrator organizer middleman gets rich.

Offline Ben Lacasse

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Re: Infinite banking concept/Bank on yourself
« Reply #6 on: July 02, 2011, 07:57:41 AM »
I rather just save my money and not buy a new car every 4 years, I guess if you were in the market for life insurance it might be a bonus but I would never bank on it. Would be good for say an emergency, like an operation or hospital stay...not their example.

I am contributing to TSP, But I'm Thinking of Pulling out of that and setting up a Roth IRA.  Military does not get a Match and A Roth would give me more control over the money.

Anyway, does anyone have First hand knowledge on Dividend paying Whole Life Insurance?

Offline Bubafat

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Re: Infinite banking concept/Bank on yourself
« Reply #7 on: July 02, 2011, 11:18:13 AM »
It's all about fee's.  That's where the TSP shines...super low fees.  You may have more choices with a roth, but you'll pay more and in the long run it's been shown that low fee options outperfom all others.  Whatever product you look at...make sure you look at what the fees will be (hidden and obvious).

http://online.wsj.com/article/SB10001424052748703507804576130692965077316.html

http://www.clarkhoward.com/news/clark-howard/personal-finance-credit/low-cost-investments-mean-more-money-your-pocket-o/nFwF/

Offline cohutt

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Re: Infinite banking concept/Bank on yourself
« Reply #8 on: July 02, 2011, 01:22:34 PM »
Get a whole life quote and review the cash value projections @ the minimum guaranteed rates.

The amount of premium needed annually to accumulate enough cash value to finance anything of material value will give you some insight into why everyone doesn't run out and do this. 

Cash value in insurance policies could be looked at to provide emergency bridge loans to one's self as mentioned above, but the cash value is there for a reason and has to be paid back in order for the policy to run its course without issue.  Most people don't realize that the mortality charges aren't locked in on permanent life insurance.  The premiums are set so that they won't increase over time (based on certain assumptions such as interest rates) but each year the cost of the actual death benefit increases as the insured ages.   Early on you fund the policy at a higher rate than the mortality costs and this is what accumulates the cash value.  Fast forward 20 or 30 years and that same premium doesn't come close to covering the mortality costs at your advanced age; the cash value covers the difference.   
Bottom line.
If you can afford the premium needed to jack up your cash value quickly then you can probably avoid the debt incurred in this scheme or through normal bank loans. 




Offline Denim Girl

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Re: Infinite banking concept/Bank on yourself
« Reply #9 on: July 18, 2011, 06:03:19 PM »
Thanks for the info - finding out what that bank on yourself was all about was in the back of my mind after hearing ads on the radio - never took the time to look up what it was - now I know.  Nothing I am interested in, though.

Offline msparks

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Re: Infinite banking concept/Bank on yourself
« Reply #10 on: December 08, 2014, 01:17:37 PM »

How about the idea that there is interest on everything you buy. You either pay interest or you give up future interest because you purchased something.

The infinite banking concept is a way for someone to amass a large cash position that is extremely safe, liquid, and tax advantaged that then allows you the flexibility and freedom to do with your money as you wish.

It's not just for purchasing cars, but also for using as a pool of money to purchase other things like investments, equipment, homes, education, vacations etc.

You may ask, why not just save up and pay cash? Because like I said, you pay interest on everything. The future opportunity cost of paying cash could equal hundreds of thousands of dollars when compounded over say 20-30 years.

Go research:
  • Economic Value Added (EVA)
  • Opportunity Cost
  • tax free wealth



Offline msparks

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Re: Infinite banking concept/Bank on yourself
« Reply #11 on: December 08, 2014, 01:22:28 PM »
Get a whole life quote and review the cash value projections @ the minimum guaranteed rates.

The amount of premium needed annually to accumulate enough cash value to finance anything of material value will give you some insight into why everyone doesn't run out and do this. 

Cash value in insurance policies could be looked at to provide emergency bridge loans to one's self as mentioned above, but the cash value is there for a reason and has to be paid back in order for the policy to run its course without issue. 

I believe the Infinite Banking Concept uses specially designed policies that have cash value that builds quickly and is available immediately.

Also as you pay your premiums your death benefit grows, unlike tradition whole life where the death benefit stays the same. Therefore for every dollar you put in, you build the death benefit by a factor of 2-3.

Lastly, like any loan, sure it needs to be paid back otherwise you are stealing from yourself. Unlike traditional financing you are in complete control. Buy a car and lose your job in 6 months you can delay repayment for as long as you like. Try that with bank loan.

Did we talk about taxes?....maybe that will be another reply. 

Offline msparks

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Re: Infinite banking concept/Bank on yourself
« Reply #12 on: December 16, 2014, 05:08:37 AM »
Thanks for the info - finding out what that bank on yourself was all about was in the back of my mind after hearing ads on the radio - never took the time to look up what it was - now I know.  Nothing I am interested in, though.

Another thought about using high CV life insurance would be in the case of a mortgage.

Many folks want to pay off their mortgage early as in this thread: http://thesurvivalpodcast.com/forum/index.php?topic=43511.0

But then you come into the conundrum of having a large portion of your net worth locked up in your home which can be hard to access. You would have to either get / qualify for a second mortgage or heloc. And if we head into a financial crisis like 2008 good luck try to get to that liquidity.

Here is another option.

You have a 30 year mortgage, you want to pay it down with extra payments, but instead you take that extra payment and purchase a high cash value life insurance policy. As your "bank" builds up you take loans and pay down the mortgage. By doing this your money is working in 3 places at once.

1. It's earning compound interest
2. It's paying off your mortgage
3. It's purchasing asset protection of 2-3 times the value of the house.

So you do this correctly you could have your home paid off in 10-15 years plus have access to all the cash you paid for the home for other ventures (like more real estate or a business)

You are recapturing the interest you would be paying to the bank back to your own bank.

So in review, would it be better to have a paid for home? Yes of course.

But also wouldn't it be better to have the money you paid for the home to access tax free for life?

This is something you can do with the Infinite Banking Concept that you cannot do with any other platform.




Offline ResidentCelt

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Re: Infinite banking concept/Bank on yourself
« Reply #13 on: December 16, 2014, 07:28:41 AM »
heloc.

Open the HELOC when credit is easy. Say it's for home improvements. No one says you have to actually borrow it right away. And if they do, pull the cash out, wait a week and then pay it back. The HELOC generally stays open for future borrowing even when you pay it off. That's the point of a LINE of credit rather than a LOAN.

Then again, it generally requires excellent credit in order to get the kind of loan terms that allow you to easily manipulate the banks products like this.

Offline msparks

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Re: Infinite banking concept/Bank on yourself
« Reply #14 on: December 16, 2014, 09:50:34 AM »
Open the HELOC when credit is easy. Say it's for home improvements. No one says you have to actually borrow it right away. And if they do, pull the cash out, wait a week and then pay it back. The HELOC generally stays open for future borrowing even when you pay it off. That's the point of a LINE of credit rather than a LOAN.

Then again, it generally requires excellent credit in order to get the kind of loan terms that allow you to easily manipulate the banks products like this.

Yes, and with the IBC all you have to do is call and tell them how much you want. It's that easy.

Matter of fact I just pulled my yearly loan for my homeowners instead of using an escrow.

Offline 11steve11

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Re: Infinite banking concept/Bank on yourself
« Reply #15 on: December 16, 2014, 02:30:22 PM »
The infinite banking plan works very well IF you have a good agent who knows how to set them up AND you are making the kind of income needed to make it work.

All of the above positive reasons are correct, add to them you are building cash value, interest and refund (overcharge returns) all  tax free.

However, I found finding an agent to be the tough part; I had to explain what I was attempting to do to all of them.

Offline 11steve11

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Re: Infinite banking concept/Bank on yourself
« Reply #16 on: December 16, 2014, 03:55:11 PM »
Added information:
The concept works because you (in a small way) are taking advantage of benefits reserved for those in the financial world.

When organizing ours, I found the cost of the insurance within the program lower than the cost of the insurance outside the program because I posed a lower risk to them financially (more of my money in the system). The refunded premiums are what really goose this thing ahead of the other banking options it could be compared to.

The amount of insurance (face value) only needs to go up if it approching a Modified Endowment Policy; an experienced agent will be able to set it up to fit your needs. Again, avoid agents who haven't set them up before or don't have special education to do it within their company.

Remember this can be part of a financial base and should NOT be the only thing. 

Also it is priced in USD and pays out in USD if you live in the US; it is not completely protected from inflation.

Offline 11steve11

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Re: Infinite banking concept/Bank on yourself
« Reply #17 on: December 16, 2014, 04:02:06 PM »
1 more thing, sounding like a broken record here, I initially understood the numbers when I was 25 but my agent was old school (insurance is only insurance), at 36 i found an agent who finally understood what I was talking about but only saw them as for people making over $250K, at age 42 I finally found an agent who was the package deal and found the training within his company to target people like us. 

Offline msparks

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Re: Infinite banking concept/Bank on yourself
« Reply #18 on: December 16, 2014, 06:12:26 PM »
Luckily this concept don't require a huge upfront capital infusion. Couple hundred bucks a month could build a nice banking policy.

Basically you can take 1/3 your income max and build a long term program that is stepped up based on debt consolidation and asset building.

Offline msparks

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Re: Infinite banking concept/Bank on yourself
« Reply #19 on: December 16, 2014, 06:55:53 PM »


Also it is priced in USD and pays out in USD if you live in the US; it is not completely protected from inflation.

Robert Murphy and Nelson cover the inflation aspect of this. For the most part they seem to think you would be pretty well insulated since the rates that an insurance company would charge borrowers would go up as well.

Maybe people don't realize but Banks and other financial institutions use insurance companies for their Tier 1 capital, meaning it's secured and very safe. But in the event of inflation the rate of return should also go up.

Lastly as part of a diversified portfolio using multiple insurance companies as well as having your money loaned out for other asset building projects like real estate and business ventures should also help against inflation.

There is nothing wrong with using your banking policy to buy Beans, Bullets and Bullion as well as land, livestock, and other shtf items.

You all may want to Google the book "How Privatized Banking Really Works" for a deeper understanding on the idea.

Also this is a really good article by Robert Murphy who is a PHD economist. http://consultingbyrpm.com/blog/2013/06/my-history-with-the-infinite-banking-concept-ibc.html

This isn't easy to wrap your mind around, but once you do it makes perfect sense.