This "Infinite Banking" spin isn't some sort of new revolution in money management, its just a repackaging of techniques that people have been using for years to manage tax liability with some breathless marketing spiel.īefore you jump in, compute the following: Keep in mind that the only advantage that using a tax favored account gives you is tax-free growth of the cash value of the policy. It never hurts to see hard numbers and to run multiple eyes over the legalese in these contracts. Some companies sold pretty generous policies during the bubble and have cut their offerings way down without fixing their marketing literature and rosy promises.įinally, let us know what you find. You are paying a commission to pool your money into their investment fund, and if your insurer goes under, you'll have to get a portion of your money (possibly only the principle) back from the state insurance commissioner. Verify that the insurance company you buy the policy from is financially stable after the market crash. Read all the critical sources you can about the pitfalls and dangers of commissions, fees and taxes eating the benefits of your account. Whole life policies require you to maintain a certain ratio of investment to premium payment and you will likely never be able access all of the money in the account for your own personal usage.Ĭompare several policies from several brokers and companies. The description is vague enough, that you can probably still get the account despite being a single male with no apparent heirs to benefit, but it raises the question of why you are buying the insurance. You'll have to do a lot of homework to hunt down a reputable discount broker or a direct policy purchase from the insurance company. I don't make a ton of money, but more than enough to live comfortably on.Ĭan't tell you where to go for a good policy, but I can tell you that most brokers make a hefty commission out of your payments for at least a year before you even start funding the tax sheltered investment account that you're trying to buy under the umbrella of life insurance. Is it possible to do this with any whole life policy, or is it more specialized than that (based on what I've read and heard, it sounds more specialized.) If I am able to start such a policy, how would I go about maximizing its potential? I'm a 30 year old male, currently single, so finding some cash to capitalize with wouldn't be a huge problem. Or, if I have to work with such a person, I would rather fully understand what they are trying to sell me, so I can make the decision to bug out if they sound like they are trying to pull a fast one. My question is, how would I go about actually setting up such an account? For all the individuals and institutions that "rave" about this, they do come off as a bit scammish, and I don't want to work with someone who isn't giving me all of the details. I really love that concept, however I'm not really sure where to start. If my understanding is correct, when properly capitalized, you can eventually reach a point where the dividends cover the policy premium, and the account becomes fully self sustaining (not entirely sure about this one.seems the dividends payout is not guaranteed, so if someone understands this part better, I'd be grateful for more insight)? Once you have fully capitalized your policy and it does become self sustaining, you are then able to take loans out up to the cash value of the account, and all principal and interest payments go back into the policy, rather than into some random third party bank. Whole life provides both a term policy as well as a dividends-paying investment. I'm at a loss about how to start such a thing, however, and how to maximize its potential.Īs I understand it, infinite banking requires whole life insurance to be truly successful, due to the nature of how a whole life insurance policy works. At first, I was extremely skeptical about the concept, however, I believe I understand the mechanics of it now, and I understand the benefit. I've been researching the concepts of "Infinite Banking", "Be Your Own Bank", etc., as they seem to be hot topics right now.
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