Infinity Banking

Coach T from my mastermind group wanted me to write up some info on the infinite banking I utilize.

If the numbers scare you don’t worry I will list a few links, books and some professionals to talk to.

This is setting up your own bank for yourself or your family, utilizing whole life insurance as a savings medium. This was very popular with everyone years ago but moved away from it when the financial advisor job was invented. Now everyone pays people to manage their money, instead of knowing how to do it themselves. Wealthy people would utilize this also to great effect, the tax laws changed and everyone shifted into different forms of investing for better returns and then the tax laws changed again. Now they have been utilized for many years again but this time only the wealthy. It seems the middle class has lost interest in understanding finances now. Less than 1-2% of insurance holders now utilize policies designed this way. Even less than the number of people trading successfully.
Before certain laws changed, Walmart would actually hold a Whole Life policy on every employee they hired, even after they left the company these policies would be maintained. Warren Buffet used to buy these from companies and hold them similar to stocks. Now days the laws have changed and become more rigorous so you cannot do this without the individuals consent etc.

I will summarize the concept, but talking to an insurance agent that specializes in this is critical since this is not utilized by many, understood by less and the premiums and benefits would vary by age and health. Policy’s can also be written in different ways based on your goals. I have one with a 20 year premium and others with a 5 year premium.

A basic example would be a policy written for doing loans.
Say a $10,000 policy premium for the year. This would be a $3,000 premium with an additional $7,000 rider in the form of term life, the rider would fall off after 5 years and then the yearly premium would be around $3,000.
This might be for a $250,000 death benefit but it grows over time.
The money is placed with the insurance company to grow via dividends/interest payments. Say around 8-10% much better than a traditional bank, my first policy was around 12%. So your policy has cash value but the key is utilizing its value to take out loans and the more you use it, the more it grows. You are not withdrawing the money, it stays in place collecting interest the entire time. Your loan is technically against the death benefit. You can not take out 100% of the the policy premium the first year. Usually 70-90% depending on the individual and the policy design, so say on this $10k policy collecting interest you take out a loan of $7k and invest semi conservatively at 10-12%.

  • So: $10,000 premium the first year.
  • Interest on your policy. ~ 8%
  • Take out a loan ~ 6% Make sure your investment has greater returns!
  • Interest on your investment. ~ 10% + as traders we strive for 30% minimum.
  • Life insurance for your family. $150k

I didn’t even use my money on my last policy. If you have a margin account you could pull the money out on margin, make your premium payment, then loan the money back out and replace it back in your margin account. You get to use the same money several times! You pay interest on loans and margin, so know your numbers if you want to do something similar.
The policy value increases steadily and after 7 or so years, you can usually start to take out more than you put in or later structure it to even pay for itself.

A good banker would always pay back his loans but it’s your bank so you can decide what to do. Have a new business venture, don’t make payments for a year or two. I pay mine back at the end of each year. I have seen policy’s designed to never pay anything back, it is all accounted for with the death benefit.
Some of the numbers for business can get creative. An example was a business policy designed to pay the taxes every year of say $60k. They started with a $100k premium payment, starting the second year they started taking loans out every year. After twenty-thirty years they had loans of over $3 million but the death benefit was over 4 million so it did not matter if they were paid back or not, the insurance company with take the loan $ out of the death benefit prior to paying anyone etc…
Once you understand the concept many people can run all their expenses through a similar policy.

In example: if your yearly expenses are $100k, you have your $100k policy that you front load then take out loans as you need spending money, then your income is making the loan payments. If you have any higher interest loans or credit cards you would have your bank pay off those loans, essentially you now own the loan versus another bank. It’s a way to utilize the money multiple times. Instead of making payments to a bank you are making the payments to yourself, collecting interest on your income. Also, similar to a Heloc you could have that money available for emergencies if needed or even to make the next years premium. Kids need a car loan – you be the bank and they pay you interest, buying a house, bike, vacation.
Personally, I buy dividend stocks and the dividends make the interest and premium payments, then I just repeat it every year slowing building a pile of stocks to have forever. Load it all into a trust, including the death benefit and you just built a perpetual money machine. Teach your kids about money and it will last for generations.
Like anything do your own research.

I’m a member of the Wealth Nation community. I follow Mark Kohler for tax and trust advice. I invest in Realestate(they don’t make anymore land) and started with Norada.
I’ve included some links and book info.

Wealth Nation – Starting your own bank.
Mark J Kohler – Accountants, Trust Attourney etc.
Norada Realestate – Beginning turnkey Realestate and coaching.
Becoming Your Own Banker – by Nelson Nash

This material has been distributed for informational and educational purposes only, and is not intended as investment, legal, accounting, or tax advice. Investing involves risk.

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Published by Jay

I came from a single parent house with four kids. My mom was a waitress and my sister helped pay the bills. I didn’t have any silver spoon in my mouth but I was able to break that cycle and I’m still learning about money and finances everyday. They just don’t teach you these things and it seemed like people didn’t want to share!

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