The Money Advantage® Podcast | Infinite Banking Concept & Family Banking

Do you want answers from the Bible about making more money and achieving financial prosperity?  The Bible has a lot to teach us about money.

https://www.youtube.com/watch?v=Nc1ZUD7_VCA

Today, Rabbi Daniel Lapin is back to discuss biblical principles. For example, he’ll discuss principles that you can apply to increase your revenue. He also shares how the Bible guides you to prosperity.

So, if you want to deepen your faith, improve your finances, and build a solid foundation for your financial life… tune in now!

Table of contentsWhy is Biblical Financial Success a Passion for Rabbi Lapin? The Bible and MoneyAncient Jewish Wisdom: The Bible and MoneyIs it Bad to Make Money?What Ancient Jewish Wisdom Reveals About HumanityBiblical Wisdom to Increase RevenueConnect with Rabbi LapinAbout Rabbi Daniel LapinView Our Other Conversations with Rabbi LapinBook A Strategy CallFAQsWhat is Rabbi Daniel Lapin known for?What does Daniel Lapin say about money?Is Rabbi Lapin’s approach only for people of faith?

Why is Biblical Financial Success a Passion for Rabbi Lapin? 

[3:16] “First of all, it’s satisfying because it’s complex. And what I mean by that is, life is complex. Any attempt to solve the problems of life with a slogan or keyword, or simple solution is doomed to failure. And people regularly ask me, you know, what is the secret to money?”

In most cases, when people ask this question of Rabbi Lapin, they’re looking for a simple solution. Yet, as he points out, it’s not a simple subject and cannot be reduced to a simple answer. This led the Rabbi to dig deeper and become more interested in the ancient financial wisdom within the Bible. 

[5:47] “I’m afraid the Bible is just like that. If you’re going to try to solve this in a simplistic way and find a verse here or a verse there that helps you with finances, you’re going to be doomed. Because anybody who knows his way around the Bible will find a verse that says one thing and then another verse that apparently says the opposite.”

To unlock wisdom from the Bible requires a deep study of its context. A verse here or there is no good without the knowledge of why it exists in the first place.

The Bible and Money

[6:35] “When you got right down to it, the question I was always asked was, ‘Why are Jews so disproportionately good with money?’ And it turned out to be a very worthwhile field of study that no one had really done.”

Since there was little accessible information on this topic, he embraced the subject. Over the course of Rabbi Daniel Lapin's books, he’s studied and identified the connections between the holy texts and cultural behaviors. Additionally, he’s studied the history surrounding Judaism and how that applies to money.

Through his books, he’s helped to make this information more accessible to people in and outside the faith. 

Ancient Jewish Wisdom: The Bible and Money

[17:00] “Heaven and Earth are two separate categories of information. One is information that is earthly, it’s materialistic. Another form of information is ephemeral…You can’t touch it… It’s something, again, that Jewish people have always understood, to their credit and to their benefit. Which is that there is a form of knowledge which is earthly. And this you can roughly call science, technology, discovery, and medicine. In all of these things, every successive generation knows more than the one before it… However, when we come to the things that never change, well, on those, we actually seem to know less as time goes by.”

Those things that never change, as they would happen, can be sourced from the Bible just as readily as anywhere else. One of the examples taught in Rabbi Lapin’s books is the relationship between parent and child, and how teenage children often ignore their parents’ wisdom, only to understand and appreciate it later as adults. This has never changed, yet the Rabbi asserts there’s more value in studying something like this from ancient texts than modern ones. Because that ancient wisdom gets it right.

[22:30 “The beauty of ancient Jewish wisdom, in my experience, is that it doesn’t try to give you specific answers, it’s not like a horoscope in your morning newspaper… But it does give you the permanent principles and the timeless truths that allow you to analyze current circumstances in the light of your own life.”

Is it Bad to Make Money?

One aspect of ancient Jewish wisdom that can be universally applied today is that you can make more money. And you do this by serving people or providing a service. There’s some argument that money is the root of evil, or that profiting from a service is morally corrupt. However, this doesn’t necessarily track. The intent behind something matters. And if your aim is to provide value to society, it stands to reason you should receive good in return. 

In fact, we believe that if you’re only in a field for profit, that profit won’t come to you. After all, you won’t be invested in providing good service. People put their dollars into things they value. If you’re skimping on quality, or cutting corners, or charging too much, you won’t get business. The proof of value exists in whether or not you fulfill a worthwhile service for people. The Bible mentions money frequently; you just have to know how to interpret.

[33:06] “Ancient Jewish wisdom expands [Genesis] and links it to other circumstances in scripture to show that it is a general statement. Which is: God doesn’t want us to be disconnected from one another, and he incentivizes us to be connected with one another. And one of those ways is through money.”

What Ancient Jewish Wisdom Reveals About Humanity

[34:38] “The overall goal of the Good Lord is that people should care for one another. And it doesn’t surprise me that a good and loving God should actually reward me for doing what he wants me to do.”

[35:09] “We all know that money doesn’t make you happy, right? And that’s true. You only have to take a look at what happens to people who win the lottery. It’s really hard to find lottery winners who, five years later, have better lives.

Things just go wrong. Getting money doesn’t improve… As far as I’ve been able to find, the only two languages that have a specific word for earn… to earn money, [are] English and Hebrew… [In other languages] it’s all the same word, and it’s a big mistake. Because getting money doesn’t make you happy; winning money doesn’t make you happy. But earning money actually makes you very happy.”

Biblical Wisdom to Increase Revenue

Inflation and the boom-bust cycle are beyond our control. To outpace or mitigate the effects of inflation, it largely falls on individuals to earn more money and reduce their spending. These lessons on money can be unlocked in the Bible.

[46:35] “It’s not a case of tricks. You don’t need me to give you a list of thirty side gigs that anybody can do… Anybody can come up with their list of things they could do to increase their revenue once we help them really believe that it’s possible. My goodness, if you just took the time you spent every week watching videos… and devoted it to making more money, you would.”

Making this change is not easy, but it is rewarding. You’ll need to make changes by setting aside time and working diligently. Yet because it is what God wants for you, according to Rabbi Lapin, God will reward you when you get it right.

Connect with Rabbi Lapin

YouNeedaRabbi.com

About Rabbi Daniel Lapin

Rabbi Daniel Lapin, author, speaker, and TV host, immigrated to the United States from South Africa. He studied mathematics, physics, and economics in Israel and the United Kingdom.

Rabbi Daniel Lapin's books include:

America’s Real War,

Business Secrets from the Bible,

and Thou Shall Prosper: The Ten Commandments for Making Money

The above books have been translated into Chinese and Korean.

Rabbi Lapin is a frequent speaker for trade groups, political and civic organizations, financial conferences, and companies in the US, Europe, and Asia. Often, he guests on radio and television shows. Newsweek magazine included him in its first list of America’s fifty most influential rabbis. His weekly podcast now enjoys over 100,000 downloads, as do his weekly columns.

With his wife, Susan, he hosts the daily TCT television show Ancient Jewish Wisdom. An enthusiastic boater who has sailed his family across the Pacific in their own boat, the Lapins, who home-schooled their seven children, live in Maryland.

View Our Other Conversations with Rabbi Lapin

Thou Shall Prosper, with Rabbi Daniel Lapin

The Holistic You, with Rabbi Daniel Lapin

Business Secrets from the Bible, with Rabbi Daniel Lapin

Successful Families, Inheritance, and Family Giving, with Rabbi Daniel Lapin

Financial Prosperity, with Rabbi Daniel Lapin

Book A Strategy Call

Do you want to coordinate your finances so that everything works together to improve your life today, accelerate time and money freedom, and leave the greatest legacy? We can help! 

Book an Introductory call with our team today to learn how privatized Banking, alternative investments, or cash flow strategies  can help you accomplish your goals better and faster.

That being said, if you want to find out how our privatized banking strategy gives you the most safety, liquidity, and growth and boosts your investment returns, read our free privatized banking guide to learn more and guarantee a legacy.

FAQs

What is Rabbi Daniel Lapin known for?Rabbi Lapin is widely known for connecting ancient Jewish wisdom to modern financial and business life. His books, podcasts, and teachings focus on the idea that prosperity grows out of service, integrity, and relationships. He has spent decades showing people how timeless biblical principles shape human behavior, success, and the way communities create value together.What does Daniel Lapin say about money?...

Have you heard about Nelson Nash Infinite Banking, and Becoming Your Own Banker and you want to learn more? Or maybe you’re already using the Infinite Banking concept, but would like to explain it better to your spouse, your parents, your children, your business partner, or friends.

https://www.youtube.com/watch?v=0czmA6OBAcw

Today, we're unpacking the fundamentals of the Infinite Banking Concept and the way it benefits you NOW and LATER. In this episode, you'll learn some of the options you have by creating an Infinite Banking policy... tune in now!

Table of contentsWhat is the Danger of Considering Only Immediate Cash Value and Ignoring the Future Death Benefit, Dividends, and Cash Value?What Kinds of Large Ticket Expenses Can I Use Infinite Banking For?Should I Put My Whole Paycheck into Whole Life Insurance?What Are the Advantages of Using the Infinite Banking Concept to Pay for College?What Are the Pros and Cons of Insuring Your Kids?How Does Infinite Banking Save Me Taxes?How Can I Use the Infinite Banking Concept to Invest in Real Estate and Earn Better Returns?How Can I Use Infinite Banking to Increase My Retirement Income?How Can I Use Infinite Banking for Generational Wealth?What Can I Do Now to Get a Policy My Future Self Will Thank Me For?Book A Strategy Call

What is the danger of considering only immediate cash value and ignoring the future death benefit, dividends, and cash value?Infinite banking concept life insurance policies are great for warehousing wealth, but it’s important to find a balance between early cash value, long-term potential, and death benefit. While early cash value is going to be of use in the short term, the death benefit is the backbone of the insurance policy. It acts as income protection for your family and helps you build a generational legacy if you’re playing the long game.

What is the Danger of Considering Only Immediate Cash Value and Ignoring the Future Death Benefit, Dividends, and Cash Value?

Working with an experienced IBC (Infinite Banking Concept) practitioner to not just create good liquidity in the early cash value, but also balance that with the long-term benefits for the most efficient policy possible is wise. This may even mean filling in your insurance “gaps” with term insurance (usually convertible) to reach your full Human Life Value. That way, you always have the right protection in place. 

It’s sometimes difficult to think about what you’re going to value thirty years or more in the future, but the more you can anticipate those desires now, the better position you put yourself in for the future. You may not care about having your full Human Life Value in your early 20s, but what about when your family grows? 

[8:47] “You have to step back and look at your own life and see the balance not only now as a younger person or a middle-aged person or an old person.”

[12:52] “The people who make the best decisions are the ones who can delay gratification, who can say no, I’m not going to eat the one marshmallow today because I get two tomorrow.”

What Kinds of Large Ticket Expenses Can I Use Infinite Banking For?

The benefit of an infinite banking policy is that you have the freedom to use your cash value on anything you wish. So the simple answer is anything. However, we often recommend using your cash value to finance things you wouldn’t normally use your checking account for. A car, a major vacation, an investment, or some other “big ticket” purchase is more suited to a loan. 

There’s no cut-and-dry answer because it’s going to depend entirely on your personal situation. For example, if you can make a big-ticket purchase in cash, but doing so would prevent you from paying your PUAs, you might be better off borrowing against your policy. That way, you can continue to fund your PUAs at a maximum. 

The reason is that paying those PUAs will buy you additional death benefit, and therefore increase your available cash value. This creates velocity in your policy and makes that compound growth more efficient. 

Should I Put My Whole Paycheck into Whole Life Insurance?

While you may be enthusiastic about your new IBC policy, it’s not a good idea to fund all of your income into your whole life insurance policy. You’re not going to treat your cash value like a checking account, because the administrative costs would be way too high. 

[20:55] “Let me just clear something up. This concept is actually in Nelson’s book, Becoming Your Own Banker, but people don’t read it quite clearly enough. Nelson actually says that’s the long-term goal…after you’ve established good money habits.”

In order to run your expenses through an IBC policy, you generally have to have an extremely high net worth. 

What Are the Advantages of Using the Infinite Banking Concept to Pay for College?

One of the first advantages to funding college with life insurance is that you, and your child, can control the terms of the repayment of the loan. This can provide much greater flexibility and peace of mind for a graduate. In addition, life insurance values don’t need to be reported on FAFSA forms the way 529 plans and other assets do. This means that whatever cash values you have won’t be held against you when applying for Federal aid. This can translate to more assistance, lowering what you need to borrow from your policy or other sources. 

Additionally, the owner of the policy does not have to be the one attending college. You can insure your child, and they can use their own policy to fund college. However, you can also borrow from any policy within your family banking system, depending on how you’ve structured your family system. 

The infinite banking concept may even lead you to more unique college funding options. For example, families have sometimes used policy loans to purchase an apartment complex for their child to stay in during college, renting out rooms to other students. There are many unique ways to benefit from the infinite banking concept when funding dreams.

What Are the Pros and Cons of Insuring Your Kids?

The growth on a younger child’s policy is not as great as the growth on an older person. That being said, there are some definite advantages to insuring your kids, too. For one, once you have a whole life policy on your child, you can keep that policy for their life, or gift it to them when they turn eighteen. This means that even if their health changes over the course of their young life, they at least have the benefit of that policy. 

Another advantage to this is that by funding this policy, you can set your child up with good savings habits. You can help them learn about policy loans and good stewardship of money by giving them access to the cash value to finance things they might want, such as a car, or college. 

And while the early growth may not be as significant as a policy on an older person, over time that policy is going to outperform just about any other comparable account, like a 529. The account won’t lose money, and will just grow steadily every year. 

How Does Infinite Banking Save Me Taxes?

Your cash value is growing tax-deferred. This means you’re not having to pay taxes on the growth of your cash value along the way. However, deferred means that eventually, there’s a tax that’s going to come due. However, with proper use of your policy, you won’t have to pay taxes on that growth of the cash value. 

If you fund a well-designed policy and are using the loan provision and paying those loans back, you can experience the use of your full cash value in a tax-free way. Meaning, as long as you are being a good steward of your loan provision, any money you use is not taxable. It becomes taxable if you default on your loans and have taken more than what you’ve paid into the policy. Then, it’s considered a withdrawal and is a taxable event. 

When the death benefit is paid to your heirs, it is paid out completely free of income tax. Therefore, you can have and use a policy without paying income taxes on any of the growth, if you do it properly. 

How Can I Use the Infinite Banking Concept to Invest in Real Estate and Earn Better Returns?

The benefit of Infinite Banking is being able to leverage your cash value to invest in real estate and other investments, without withdrawing funds. By leaving your cash value intact, you continue to earn interest and dividends on the gross value of your account. This means that you can earn a return through investments while still getting the maximum benefit of your compounding interest. Earning a return in two places at the same time.

It’s critical, however, that you build good habits first before you invest. The reason is that too many people decide to get started too soon, and they don’t have good habits. So they invest without a mind for paying back those policy loans, which leaves them with a lot of cash flow and very little liquidity all over again. The benefit of whole life insurance is liquidity, so you protect that by paying back the loans, ideally with the cash flow from your investment properties. Over time, you’ll create a system of passive income, if you’re patient and diligent. 

How Can I Use Infinite Banking to Increase My Retirement Income?

Using the volatility buffer strategy popularized by Dr. Wade Pfau, you can actually maximize your future retirement income. If you have an investment portfolio you intend to withdraw income from, you can use whole life insurance as a buffer for years when the market is down. By pulling income from someone else, you can preserve more of those investments, and give the account some time to recoup losses. By doing so, you can add years (even decades) to your retirement income.

[46:00] “I hope that through this conversation you are beginning to realize that I do not have a diminishing need for life insurance in my later years. There’s a prevailing opinion—not in the infinite banking sp

Reverse mortgages are becoming more mainstream. But to benefit from using one, you need to understand how to incorporate it into a responsible retirement income plan. So exactly what is a reverse mortgage? What role should it fill in your retirement planning? And should you open a reverse mortgage early or as a last resort? 

https://www.youtube.com/watch?v=fph0k20tHXc

To answer your questions, we’ve invited back a special guest, Dr. Wade Pfau. Dr. Pfau is the author of Reverse Mortgages: How to Use Reverse Mortgages to Secure Your Retirement, and host of Retirement Researcher. He shares his significant work on retirement income planning to shed some light on reverse mortgages. 

To learn how to get the most retirement income with reverse mortgages, so you can enjoy your money and your life the most… tune in now!

Table of contentsWhy Retirement Income?What is a Reverse Mortgage?Different Strategies for Borrowing When Should You Use a Reverse Mortgage?The Right MindsetAre Reverse Mortgages Expensive?Connect with Dr. Wade PfauAbout Dr. Wade PfauBook A Strategy Call

Why Retirement Income?

[4:50] “I was interested in retirement income planning, it really just evolved from research I did in grad school… There was a proposal in the early 2000s to privatize part of Social Security, and I was investigating how that might work out in practice, and that's really translated into what I do today in terms of personal retirement planning. But then, in that regard, I really built a career around this insight that is not fully understood yet in the general population, which is when you're retired, investment risk changes. When you're spending from assets, you're more exposed to investment volatility.”

This volatility in retirement means opens retirees up to a wide variety of income strategies that can increase the longevity of assets and income. However, many typical financial talking heads consider these strategies unconventional, and many people don’t know how to use them properly.

One of those misunderstood assets is home equity, and subsequently, reverse mortgages. However, when used strategically, these elements can really make your retirement income far more efficient. 

What is a Reverse Mortgage?

A reverse mortgage, as Dr. Pfau shares, is when you borrow money from the home and don’t have to pay it back until the end of the loan. About 90 percent of reverse mortgages are represented by the Federal program of Home Equity Conversion Mortgages (HECM). They issued the first HECMs in the late 80s, and the government is consistently working to ensure that the program is operating as well as it can. 

The amount you can borrow from your home depends on your age and the current interest rates, and reverse mortgages actually benefit from low interest rates. A HECM gives you access to a percentage of your appraised home value.

What the reverse mortgage actually does is give you a line of credit to tap into. This line of credit increases over time. And unlike a regular home equity line of credit, a HECM cannot be frozen or canceled. You have access to it for as long as you choose to remain living in the home. Once you move out of the home, the loan balance becomes due.

The benefit of a reverse mortgage is that it gives you more options for spending. That way, you don’t have to draw from certain assets during bad times. For example, if most of your retirement income is coming from equities, you don’t want to pull that income out while the market is down. A reverse mortgage is just one way to create that flexibility.  

Different Strategies for Borrowing 

The strategy Dr. Pfau proposes acts more like a volatility buffer by giving you discretionary power to pull out income as you see fit. However, there are other reverse mortgage strategies. For example, there are reverse mortgage options to pull out a fixed monthly income. 

While this monthly income doesn’t help with a specific sequence of returns risk, it helps you to reduce what you’re pulling from your investments. This helps you to preserve those investments overall. 

Both strategies reduce income risks fairly well. And ultimately, it is up to the individual to decide what works more synergistically with your assets and way of thinking.

When Should You Use a Reverse Mortgage?

Typical financial wisdom is to use a reverse mortgage as a last resort. Many suggest using it when you have exhausted all other options. The issue here is that doing so can be incredibly inefficient. Because what’s happening is you’re just waiting for the worst to happen. In some instances, this could be an event where you lose significant portions of your equities, and still have to draw an income, which locks in those losses, and ultimately hastens your race to the bottom. 

On the other hand, if you were to open a reverse mortgage as soon as possible with a discretionary line of credit, you have options. You may not use that line of credit for years, all the while it’s growing. Then, if the market takes a dive, you have somewhere else to pull money from. This can actually extend the life of your account significantly because you’re giving it time to recover. 

[20:20] “There are many different strategies around [reverse mortgages]. But then let’s look to see how that performs relative to the last resort strategy. And that’s where consistently–not a hundred percent of the time–the odds are really in the favor of this more strategic, coordinated reverse mortgage strategy.” 

The Right Mindset

[32:40] “The great advantage of the reverse mortgage is it creates liquidity for an otherwise illiquid asset. It let’s you spend from your home equity when you otherwise would not be able to do that.”

While this is an incredible opportunity, there are situations where it might not work on an individual level. For those who cannot use this ability wisely, it might be better in the long run to avoid a reverse mortgage. If used unwisely, or without a strategy, it may be more trouble than it’s worth. 

[33:15] “If you’re tempted to spend it because it’s there, you maybe want to hold off and try to prevent yourself from getting into that situation. If you can manage the responsibility of having all these funds available, but not just spending them because you can, that’s really the kind of scenario where the reverse mortgage can have the most positive impact.”

Are Reverse Mortgages Expensive?

[26:03] “[There’s] this idea that reverse mortgages are expensive. And they can certainly appear expensive. There’s certainly some sticker shock involved. That was one of the major changes of the 2017 reforms, was to increase the initial mortgage insurance premiums that provide protections…”

[36:36] “So when you set up a reverse mortgage, if you have, say a five hundred thousand dollar house, it’s not inconceivable that between the mortgage insurance premiums the origination fee, and other mortgage closing costs, it could be up to, say, twenty thousand dollars to set up the reverse mortgage.”

While this can be a pretty substantial amount, the 2017 reforms prevent reverse mortgage lenders from canceling, freezing, or otherwise blocking a line of credit. This helps to protect retirees from losing that stream of income or liquidity that they’ve paid to set up. Reverse mortgages are also non-recourse, which means that the lender cannot ask for more than the house’s appraised worth. In other words, if the house is worth $500,000 at the time the loan comes due, that’s the upper limit of the loan. 

[37:55] “It’s important to emphasize when I look at all these different ways of using a reverse mortgage, I do incorporate all those costs. And so when I say that opening the reverse mortgage earlier and using it strategically gives you a better outcome, that is a better outcome net of the cost that is a part of the loan.”

Connect with Dr. Wade Pfau

[email protected] Mortgages: How to Use Reverse Mortgages to Secure Your Retirement (3rd Edition)

About Dr. Wade Pfau

Wade D. Pfau, Ph.D., CFA, RICP®, is the program director of the Retirement Income Certified Professional® designation. He is also a Professor of Retirement Income at The American College of Financial Services in King of Prussia, PA, as well as a co-director of the college’s Center for Retirement Income. As well, he is a Principal and Director for McLean Asset Management and RISA, LLC. He holds a doctorate in economics from Princeton University and has published more than sixty peer-reviewed research articles in a wide variety of academic and practitioner journals. He hosts the Retirement Researcher website and is a contributor to Forbes, Advisor Perspectives, Journal of Financial Planning, and an Expert Panelist for the Wall Street Journal. Wade's newest book is Retirement Planning Guidebook: Navigating the Important Decisions for Retirement Success.

Book A Strategy Call

Do you want to coordinate your finances so that everything works together to improve your life today, accelerate time and money freedom, and leave the greatest legacy? We can help! Book an Introductory Call with our team today at https://themoneyadvantage.com/calendar/ and find out how Privatized Banking, alternative investments, or cash flow strategies can help you accomplish your goals better and faster. That being said, if you want to find out more about how Privatized Banking gives you the most safety, liquidity, and growth… plus boosts your investment returns, and guarantees a legacy, go to https://privatizedbankingsecrets.com/freeguide to learn more.

Are you wondering what is a life insurance policy loan, and how can it help you? Or maybe you’re already using Infinite Banking, but would like to explain it better to your spouse, your parents, your children, business partner, or friends.

https://www.youtube.com/watch?v=FrjVeMXW8is

Today, we're unpacking the truth about the Infinite Banking Concept and the power of policy loans. Policy loans are part of what makes the infinite banking strategy work so well. We're answering the most common questions we hear about policy loans, so you can be clear on exactly what they are and how they work. If you're ready to learn more about policy loans and how you can implement them in your own life... tune in now!

Table of contentsWhat is a Life Insurance Policy Loan?

What is a Life Insurance Policy Loan?A policy loan is money that you are borrowing from the life insurance company, using your cash value as collateral. The life insurance company is contractually obligated to allow you access without qualification to a policy loan. Then, they offer you a loan with an interest rate, which you can pay back at your own discretion (on your own timeline). 

What is Financing?

While people typically think of financing as the process of borrowing money to fund something, we know that you finance everything you buy. The reason is that you’re either paying interest through a loan or line of credit, or you’re passing it up because you’re paying in cash (and losing the money you could have earned elsewhere). 

[2:50] “We finance everything in our lives, and people don’t get that because people say, ‘I don’t have any debt, I just pay for everything in cash.’ Well, Nelson Nash made me realize that paying cash is still financing because you’re giving up the opportunity to make money on your cash that you actually pay. So you’re always financing. You’re either paying interest, or you’re giving up the ability to earn interest”

How Does Infinite Banking Provide a Solution for Financing?

Infinite banking provides the solution to the financing problem by allowing you to create a pool of money that allows you to finance anything you want without passing up interest. So while you may pay interest on a policy loan, you can also earn interest, while also potentially earning cash flow through your investments. Even without investments, though, infinite banking gives you a way to finance your life as efficiently as possible.

The reason infinite banking is so efficient is that, with a dividend-paying whole life insurance policy, you can save money, grow money, and use that money without interrupting your compounding interest. And you can do this thanks to the policy loan provision.

How Does Infinite Banking Give You Better Growth and Accessibility?

Infinite banking puts you in a position where you’re not only storing and growing capital in the policy, but you also have a contractual guarantee to access and use that cash through a policy loan. The policy loan may seem like an unnecessary hurdle to jump through, but by using other people's money (the insurance company's money), you can keep your account earning interest and dividends at its full potential. Not only is this incredibly efficient, but it also provides more certainty and stability than either a bank or the stock market.

How Does Infinite Banking Compare to Other Strategies for Storing Cash?

When you store cash in a whole life insurance policy designed for infinite banking, you’re able to prioritize growth, safety, and liquidity at the same time. Most other cash storage strategies only allow for one or two. For example, storing cash with the bank gives you (a little bit of) safety and liquidity. But it doesn’t do much to grow your money. An investment account might give you growth over time, but it’s not very liquid, nor is it particularly safe. Whole life insurance protects your income, helps you to grow your money with modest interest and dividends, and allows you to access your capital without interrupting the compound interest via a policy loan.

[17:23] “The problem is you’re interrupting the compound growth, which means you’re having a stop-start-stop-start effect with your compound interest. Which is the reason why nobody in our culture now feels any kind of emotional excitement about compound interest. Because nobody experiences the long-term effects of 50-70-80 years of compound interest growth. And if you have the ability to continue to earn that compound interest that never stops compounding, you would be more excited about compound interest.”

What is a Life Insurance Policy Loan?

A policy loan is money that you are borrowing from the life insurance company, using your cash value as collateral. The life insurance company is contractually obligated to allow you access without qualification to a policy loan. Then, they offer you a loan with an interest rate, which you can pay back at your own discretion (on your own timeline). 

How Easy is it to Get a Policy Loan?

A policy loan is simple to obtain with your life insurance company. In order to get a loan, you must first have the amount that you wish to borrow available. That means that you cannot have that value already tied up in an outstanding loan, and your available cash value must equal what you wish to borrow.

Then, getting a loan is as simple as contacting the insurance company and requesting the loan. Generally, you can have the money deposited in your account in a few days.

It is important to note that you typically can’t collateralize your full cash value. Often, you can collateralize about 90%, give or take. 

Do I Have to Qualify for a Policy Loan?

There is no application or qualification process to get a policy loan. Unlike other lenders, you don’t need a certain credit score, debt-to-income ratio, or other qualifiers to be approved. All that is required is cash value to collateralize. 

What Does a Policy Loan Use as Collateral?

A policy loan uses your cash value account as collateral. Your cash value is the equity of your death benefit, which increases as you pay premiums and also grows with interest and dividends. 

When you take a policy loan, the insurance company places a lien against your cash value. As you repay the loan, the cash value you can then use becomes replenished. So if you have $100k that you can borrow, and only take $10k, you have $90k that you can still borrow against later. As you repay it, you replenish your pool of $100k to borrow against, as well as any growth your cash value has accrued in the meantime. 

How Does a Policy Loan Impact My Cash Value and Death Benefit?

When you take a policy loan, you collateralize your cash value, and as you pay back the loan, the collateral falls away. However, some people choose not to pay back a policy loan, or they pass away with an outstanding loan. When this happens, the insurance company reduces the death benefit by the loan and any interest. 

Remember that the cash value is like the equity of your death benefit. This means that your heirs don’t get paid a death benefit plus the cash value; they only receive the death benefit. The cash value simply represents the accessible portion of the death benefit at the time. 

Whose Money Am I Using in a Policy Loan?

When you take a policy loan, you’re not using your money, you’re using the insurance company’s money. They loan this money from their reserves, and when you pay interest on your loan, you pay that interest to the company. The money only comes from your policy if you default on the loan, and the company collects the collateral from your policy.

Why is it a Good Deal for the Life Insurance Company to Give You a Policy Loan?

Policy loans are not just great for you, they’re great for the insurance company because they have guaranteed collateral via your cash value. The insurance company knows that no matter what happens with the loan, they’ll see that money again, so for them, there’s very minimal risk. And the minimal risk is great for lenders. Because loans are low risk for the company, they can charge competitive interest rates and still make a profit, which then benefits the policyholders. 

How Does My Money Continue to Compound Uninterrupted with a Policy Loan?

While it may seem like you’re pulling money from your cash value and then putting it back when you have a policy loan, you’re not. You’re actually using the life insurance company’s money and paying them back. Because you’re not using your cash value, it remains in your account and can earn interest and dividends like it normally would. 

Depending on whether your life insurance company is direct recognition or non-direct recognition, the interest and dividends may be applied differently to your cash value when it’s collateralized. However, this difference is generally minimal, and you’re still earning interest and dividends in either scenario. 

How Do Policy Loans Give Me More Control and Flexibility?

When you take a policy loan, there are several reasons you have more control and flexibility. One of the key factors is that you have control over your repayment schedule. When we say you have control, we mean it. You control how often you pay, how much you pay, and when. In fact. And you can change your mind about these factors whenever you want. 

Because the insurance company assumes very little risk (they can recoup that money from your cash value if needed), they give policyholders significant control. This means that if you wanted to use a loan to finance an investment, and then pay the loan with the cash flow, you could, even if the investment didn’t start cash flowing for two years. This allows you to use the money on your own terms and replenish your leverageable cash value at your own pace. Once you know how a policy loan works, the next step is putting it to work — that's the strategy of using policy loans in Infinit

This week, we had the pleasure of joining our Canadian friends on the Wealth Without Bay Street podcast. In this episode we talk about our business, and how we can apply the principles of infinite banking in Canada.

If you've ever wondered how The Money Advantage got its start, how our perspective has shifted on life insurance, and the importance of implementing what you learn... tune in now!

Table of contentsHow The Money Advantage StartedTransformational LearningHow the Message Gains TractionGetting Back to the FundamentalsDealing with NegativityHow a Near-Death Experience Elevated Our Understanding of the Death BenefitRe-Thinking the Value of a LegacyBook A Strategy Call

How The Money Advantage Started

The Money Advantage Podcast began after Lucas and I met Bruce and his team at an event they put on many years ago. Bruce’s team had been weary of the industry, which seemed only to be interested in pushing products over personal solutions. Yet, Bruce and the team knew there were so many good, well-meaning advisors in the industry.

[3:05] Bruce: “We decided we were going to start something called the Freedom Advisor event, and we were going to open this up to people across the nation who wanted to do things in a collaborative way to help make the industry better.”

Lucas and I met Bruce through this event after becoming familiar with Nelson Nash and the Infinite Banking Concept. The event put us with many like-minded people and was an incredible opportunity. Months later, after putting out our own content, the idea came to us to reach out to Bruce and create video content with him. Now, over four years later, we continue to produce educational content and love every moment. 

Transformational Learning

[9:26] Rachel: "I was thinking the other day how much more transformational it is to engage with material rather than just hear someone else talk about it. And I think that this is really important, even for listeners to the show.” 

Engaging with information and stories helps you to relate it to your real life. You can choose to read or listen to something, and then set it aside, and that’s a fine thing to do. But when you take that information and attempt to make sense of it in the context of your world, you have the opportunity for transformational learning. 

If you want to create a real transformation in your life and your finances, you have to take watching, listening, and reading into thinking, doing, and applying. With the infinite banking concept, application is key. After all, the title of Nelson’s book is “Becoming Your Own Banker,” which hints at a lifelong dedication to learning and implementing these strategies. 

[24:50] Rachel: “I’m just so amazed that [Nelson Nash] did say [infinite banking is] a concept. It’s a way of thinking. It’s a framework, if you will, to be able to fit in so many of the challenges that people face financially and find a way to put control in someone’s hands. For the person who is willing to say, ‘I am responsible for my own financial future, yes, that’s me. I will choose to become educated, I’ll choose to make the right choices, and I’m going to choose not to just rely on someone else to tell me what to do.’”

How the Message Gains Traction

[30:45] Rachel: “I think the challenge is that because information is so easy to come by, the people who are best at presenting that little piece of information, in the most compelling way, and seeming the most confident about it, and putting the most money behind the advertising dollars to make that more visible to others get heard. And then the consumer sees that and thinks it’s the most popular so it must be the truth.” 

[33:04] Bruce: “What happens is, people comment more on what they’ve heard than what they experience.”

If you’ve followed our content, you’ll see that we frequently get comments from viewers who have heard that whole life insurance is bad. Yet, they’ve never experienced whole life insurance or really listened to pro-IBC content to make their decisions. 

Getting Back to the Fundamentals

If you want to learn and create transformation in your life and your finances, you must return to the fundamentals. The pitfall of learning is thinking you know everything there is to know. Even experts in their fields can benefit from returning to their roots and brushing up on the foundations. 

[39:59] “This book, [Becoming Your Own Banker]... has changed every aspect of my life, including my financial life, but not limited to. There’s not a single component of my world that is not shook and impacted in a positive way by the essence of what is in this book. It is a core element that underpins every single item that I think about in my life, including my relationships with people, all because of this book.”

[40:40] “If you want to work with someone on our team, if you don’t own a copy of this book and you haven’t read it, there is absolutely no point in getting started, because everything begins here. If something were to happen to me and you still have this book, I can sleep. I can have confidence knowing that you can figure it out. Because all the answers are here.”

Exposure to the fundamentals or core components of IBC allows you to actually build something powerful. You can’t build a sound system for your wealth without a solid foundation, and a firm foundation requires that you revisit the basics. 

Dealing with Negativity

When talking about infinite banking, there can be a lot of negativity from people who don’t understand what it is (and is not). And while that can be discouraging to some, we’ve learned that within the negativity is an opportunity for positive engagement. Not only does any engagement boost your content to new people, but it’s also a chance to educate. We’ve actually created a few series within our podcast to address questions and comments, both positive and negative. It’s the perfect opportunity to bring additional education to our audience.

You can find some of those articles here:

Infinite Banking Objections, AnsweredIs Infinite Banking a SCAM? Dave Ramsey Says So.Answers to Your Money Questions, Part 1Answers to Your Money Questions, Part 2Answers to Your Money Questions, Part 3

[48:40] “Simon Sinek says you don’t want to do business with everybody that needs your goods or services, you only want to do business with people who believe what you believe.”

How a Near-Death Experience Elevated Our Understanding of the Death Benefit

[52:30] “Lucas and I had come into life insurance first from the side of, ‘How do we store cash best?’ We moved from ‘let’s store money in gold and silver,’ and then we realized that’s not as liquid as we wanted it to be because it was in half the value when we wanted to liquidate it for the purpose of investing in a business.”

We started seeking options to store our cash that would be better than the bank, yet more liquid and stable than gold and silver. Our questions led us to whole life insurance and IBC for storing cash. At the time we had a single, small policy on Lucas, yet we felt like something was missing. That missing piece, we realized, was having more insurance that covered both of us. 

In that research, we came across the idea of Human Life Value and decided we wanted to see just how much we could get to be insured up to that number. But at the time, we didn’t think we could qualify for that full amount in whole life insurance. We made the choice to supplement our existing policy with term insurance policies to at least have temporary coverage. 

Fast forward some time, when after delivering my second daughter, there were severe complications. It was a challenging time for our family, to say the least, and there was a point at which it didn’t seem like I would make it. If the worst had happened, the life insurance we had would have given Lucas time to grieve and be a father without worrying about how to care for our family’s basic needs. 

Re-Thinking the Value of a Legacy

[56:54] “But really it made me think completely differently, not just about life insurance—because I could have had the awareness that everyone should just have whole life insurance and as much death benefit as they could—but it really got us thinking even deeper. That my life and my moments are not guaranteed; my husband’s are not, either. And if at any point, something happened to both of us, there would be all the money that our kids would ever need to be able to handle their life and make decisions, and have an inheritance. However, that’s not enough.”

Not only would it be critical for our family to have life insurance in place so that everyone would have the monetary means to go on. We realized that our family also needed the education and direction to be good stewards of that money. It would be a disservice to leave our children with money they didn’t know how to handle for the benefit of themselves and the generations after them. 

Our family’s legacy is so much more than the wealth we’ve created. It’s the values we cherish and cultivate, the skills we’ve honed, and the ability to use our resources wisely. All this and more is critical for Lucas and me to pass on to our daughters and is the basis of my upcoming book. 

Book A Strategy Call

Do you want to coordinate your finances so that everything works together to improve your life today, accelerate time and money freedom, and leave the greatest legacy? We can help!  Book an Introductory Call with our team today https://themoneyadvantage.com/calendar/, and find out how Privatized Banking, alternative investments, or cash flow strategies can help you accomplish your goals better and faster. That being said, if you want to find out more about how Privatized Banking gives you the most safety, liquidity, and growth… plus boosts your investment returns, and guarantees a legacy, go to https://privatizedbankingsecrets.com/freeguide to learn more.

Culture matters in the corporate world. It drives profitability and retention, reduces turnover, and leads to higher job satisfaction. But the family is an arena where the stakes are even higher. Without a strong family culture, all your plans, strategy, and even your legacy will fall apart.

https://www.youtube.com/watch?v=YrN5LyEtcpE

That’s why it’s time to dedicate yourself to building and living the family culture today. But what can you do to redeem your family and infuse your everyday life with meaningful connections? 

Jeremy Pryor, Partner and Co-Founder of Family Teams is helping families build a multigenerational team on mission.

Today, we’re having Jeremy back to talk about the definition of family, why you want to build and keep improving your family culture, and the practical steps you can take now to lay the foundation for children who opt into your multigenerational family team.

If you’re looking for practical tools to strengthen your family culture today, so you have more connection, stronger bonds, more time together, and kids who choose to stay committed even after they grow up… tune in now!

Table of contentsWhat is Strong Family Culture, and Why Does it Matter?The Importance of FamilyWhat Are the Components of a Strong Family Culture?Challenges for Modern FamiliesBeing Intentional with Your FamilyNegative Family Experiences Important Elements of a Thriving Strong Family CultureConnect with JeremyAbout Jeremy PryorBook A Strategy Call

What is Strong Family Culture, and Why Does it Matter?

 [4:06] “When you’re starting a family, this is one of the great privileges that you get to design the kind of family that you want to have.”

When you are developing a company, you have the power to develop the mission and culture of that company. You do this by identifying the goals of the business, as well as a way of “being” within the company. And just like you can formulate this cohesive work team, you can also form a cohesive family team. 

It starts with your relationship with your spouse. By identifying your shared values and beliefs, and how you wish to exist in your household, you lay the foundation for your family culture. 

[5:05] “It’s a wonderful experience to grow up in a household, as a child, that has a particular culture that brings the family together. And it can be based on things that you really feel called to, that you really enjoy. There’s not a blueprint for family that is so rigid that you can’t bring a lot of distinctives into the family, and make it something that’s truly unique.”

The Importance of Family

[7:10] “I come at this as somebody who was very confused about the topic of family; not very excited, it just didn’t seem like something that…really was working well. I grew up in the Seattle area. There was just a lot of divorce, and I just noticed a lot of brokenness.”

Family wasn’t something Jeremy believed he could choose to build. His experience with family units as a kid was less-than-ideal. This made him believe that you either lucked out or you didn’t. But over time he learned that there were families with an incredibly deep and intricate root system. The multi-generational families he met had a strong sense of identity and culture, and they supported one another. Their systems don’t implode when the kids grow up and have their own kids.

Team Pryor’s work is all about proving that family culture can be cultivated by calling in your family members to be a part of something bigger. This helps family members find a sense of pride and belonging within the family unit, as well as a purpose. A family with strengthened bonds can work together for the good of all involved, and foster a system of support. 

What Are the Components of a Strong Family Culture?

[12:48] “One of the most basic ways to think about culture [is] the repeated actions that are distinctive to that group.”

Oftentimes, companies come up with “aspirational values,” or things that they wish were true about their company. They may talk up those values to employees, or put them on the wall somewhere, but they have very little impact on how the company actually behaves. 

[13:13] “To me, there has to be a way to translate those values into repeated action. And we have two massively powerful templates given to us by God in Genesis 1 for crafting repeated action, and they are the week and the year. There’s also the month, but those are the two most powerful. So we very carefully cultivate our weekly rhythm as a family around our values, and we also carefully curate our annual rhythm around the things that we value.”

Creating a family culture depends on what you celebrate and do within your own family. If you want something to be a part of your family culture, you have to “craft” it into your family rhythm. For example, if you have a desire for your family to be artistic and appreciative of the arts, you incorporate that into your weekly and annual rhythm. That may include setting aside time each week for crafts and projects, taking trips to museums or exhibits, and fostering conversations about art at meal times. You could apply this to anything: entrepreneurship, music, literature, and more. 

Challenges for Modern Families

[15:20] “I think what’s really tough for modern families is that they expect that their children will have–and their family’s rhythm will be purely designed around–other people deciding what those things for them.”

As your children grow up, they have so many outside influences that have opinions and influences on your children’s lives. Coaches, teachers, youth leaders, and so many other influences are involved in the lives of your children. It can feel like you’re battling these outside voices on what your family culture is and will be. 

In fact, more than ever, it seems like kids are becoming better and better at forming outside social relationships, and worse at forming strong generational bonds. And while you may live in a social environment with peers your age while you’re in school, life after high school or college is very multi-generational. In church, at work, and within families, you must navigate relationships with people older than you and younger than you, and many people don’t know how to do this effectively. 

Being Intentional with Your Family

One reason it’s so important for Team Pryor to craft their family culture is because of intention. So much of the “default” family model is just that—default. And when Jeremy and his wife were starting their family, it was important to them to examine why they were going to do certain things or not. That way they could control and cultivate, to a degree, what their family would be. 

Without that intention, what you get will probably be the “default,” whether you like that family model or not. So bringing intention into the picture allows you to be on the same page and work toward a family vision that brings you a sense of joy and pride. 

Jeremy says he is a highly individualistic person. Yet, he understands that despite that being his personal identity, he also has a family identity to live up to, and that factors into how he shows up for his family. 

[23:30] “For me, it is a daily decision, and especially in that weekly meal, to say I want to be a father at this table. So what I tell people when we get to a table is [that] we’re going to experience our family-ness. Everyone at this table is their family identity. We don’t have anywhere better to go. It’s Friday night, we have nothing else planned, we can stay up late. We’re going to eat a great meal, we’re going to hang out together, and I’m going to be a father.”

Negative Family Experiences 

Negative experiences will inevitably happen. All relationships can have disagreements, hurt feelings, and more. Yet within family structures, many people choose to alienate themselves from family altogether, rather than heal those relationships. 

[25:25] “A lot of the identity conversations that are being had in our culture are from wounded people who are understandably very badly hurt because these family identities have not gone well for them. And so they are seeking other, alternative identities… And they’re trying to figure out, would society be better if everyone existed with much more atomistic, individual identities versus family identities? Again, that’s a very open conversation, let’s have that conversation, and I’m operating from a set of axioms that say that the family identities are actually better at leading to human flourishing, and what we need to heal family identities… If you’ve had very negative experiences in these areas, the answer is not less family or not healthy family, but it’s actually to learn how to build a healthy family; to be equipped to build healthy family identity.”

Important Elements of a Thriving Strong Family Culture

If you want to know what a thriving family culture looks like, Jeremy outlines a few keys to success. 

Repeated activities or habits (weekly, monthly, and annual rhythms)

Gathering and sharing family stories

Canonical stories associated with your family values

Use of physical space to reflect family values. How does your physical space reinforce what your family finds important?

Annual family summits to call children into the family culture and influence the family’s direction

Discussing family assets and how they serve the whole family unit

Supporting the individual callings of family members

Ultimately, Jeremy shares, the secret to creating a strong sense of family is to make sure that each member of the family feels like they belong together more than anywhere else. This includes looking out for the member of the family that feels the least sense of belonging and helping them feel fully known and fully loved. 

[56:48] "Belonging is about being fully known and fully loved at the same time....

Could a reverse mortgage help you reach your income goals? How do reverse mortgages work? Is a reverse mortgage good or bad?

https://www.youtube.com/watch?v=820qDZ5CkFE

Today, we’re talking with Mike Stanley, Regional Senior Lending Sale Manager for Thrive Mortgage. He shares everything you need to know about reverse mortgages explained.

So, if you want to understand just how reverse mortgages work, their pros and cons, and the costs, and get answers to your questions so you can make decisions… tune in now!

Table of contentsHow Mike Got Into Reverse MortgagesThe Baby Boomer GenerationBorrowing Qualifications for a Reverse MortgageWhat is a Reverse Mortgage? Numbers on a Reverse MortgageWhat if You’re Not Old Enough?Get in Touch with Mike StanleyBook A Strategy Call

How Mike Got Into Reverse Mortgages

[9:40] “Most people don’t know what a reverse mortgage is other than a myth or a rumor that they’ve heard.”

Mike Stanley got into the world of reverse mortgages in 2008, yet not without hesitation. He didn’t want to be taking advantage of people, and most information about reverse mortgages is a little hazy. In reality, there are quite a few reverse mortgage strategies that can help people in different ways. 

10:25] “It’s not been called, technically, a reverse mortgage since 1988. That’s when congress, in 1988, passed a law called home equity conversion mortgage. You may hear it called a HECM. At that point in time, it stopped being a reverse mortgage, but it was such slang for the terminology. People still call it a reverse mortgage even though it’s a federally insured FHA loan that has all the protections of FHA.” 

The Baby Boomer Generation

[13:10] “48 percent of Baby Boomers are retiring while carrying a mortgage into their retirement years… Another interesting fact, 50 percent of those 65 or older have their houses paid for, and 27 percent of those will downsize or right-size into a home that better meets their retirement needs.” 

If you’re in the Baby Boomer generation, considering a reverse mortgage strategy can help you downsize. It can also help you find more retirement income by leveraging home equity. If not, those with Baby Boomer parents should be considering how they’re going to care for their parents. 

Borrowing Qualifications for a Reverse Mortgage

[19:25] “Right now, to be a borrower, the borrower has to be 62 years of age minimum. It is a mortality or equity-based loan… We take four things into consideration. We take in their age… we take in the value of the home, and we take in the interest rate on the loan—and how much equity we’re going to have to leave in the house.” 

What is a Reverse Mortgage? 

The short and sweet answer is that you give up the equity in your home in exchange for regular payments. This can provide an income to homeowners over the age of 62, or help you keep your home in retirement. There are even options for those who have children who wish to inherit the home.

[24:18] “There’s a unique feature in the reverse mortgage… it’s called a non-recourse feature, which means and states that no one is ever responsible for paying their home back personally. Only the equity in the house can ever be used at the time the loan is due. The time the loan is due is when the last of the two borrowers… no longer live in a property as their primary residence, or one of them passes away, or they sell the house, or they refinance the house.”

[28:14] “There are four ways of taking money out. If you take a lump sum, there are two options. There’s a fixed rate option. And whatever you take out on a fixed rate is the maximum you get; there are no more funds available. On the… adjustable rate, there is a line of credit.”

[30:30] “Now they do have two other options. They could take what we call a tenure option, which a tenure is a life expectancy payout. Let’s assume that we run our numbers and based off their life expectancy and the pool of money that they have, we can give [them] 800 a month for as long as [they] live in the house… Number two, if 800 dollars a month is not enough, they say, Mike, I need 1100 dollars a month, then we’ll restructure it as a term payment or a term certain annuity.”

Numbers on a Reverse Mortgage

For a $300,000 property at 62 years of age, based on today’s interest rates, you could get about 45% of your home's equity through a reverse mortgage. If you’re 75, you could get 50-52%. Mike is even working with a couple who are both 94, and they’re getting 70% equity because they have fewer years to accumulate interest.

When you take a reverse mortgage by relinquishing your equity, you get access to a pool of money that is that percentage above. You can then use it as you see fit, and when you’re not using it, it’s earning interest. Mike shares that current rates right now are around 5.5%, so if you get to take a lump sum and sit on it for a while, you can be doing quite well. 

What if You’re Not Old Enough?

While you may not be able to do a reverse mortgage yet, there’s a chance you know someone who could benefit. If you have parents, grandparents, or aunts and uncles planning to retire soon, it’s worth knowing a bit about reverse mortgages. Not to mention, it may just be a good idea to know about them for your future use if you decide to incorporate them into your income strategy upon retirement. 

Get in Touch with Mike Stanley

(757)[email protected]

Book A Strategy Call

Do you want to coordinate your finances so that everything works together to improve your life today, accelerate time and money freedom, and leave the greatest legacy? We can help! Book an Introductory Call with our team today at https://themoneyadvantage.com/calendar/ and find out how Privatized Banking, alternative investments, or cash flow strategies can help you accomplish your goals better and faster. That being said, if you want to find out more about how Privatized Banking gives you the most safety, liquidity, and growth… plus boosts your investment returns, and guarantees a legacy, go to https://privatizedbankingsecrets.com/freeguide to learn more.

If you're using Infinite Banking with a life insurance policy, you have multiple options to access your cash value. But which one is the best? Should you always use policy loans? What if you can get a lower interest rate by borrowing against your cash value with a third-party loan?

https://www.youtube.com/watch?v=pbQdVbQ1_q0

Let's discuss all of your options for accessing capital. This includes policy loans, withdrawals, cash value loans from a third party, and even capital from separate sources.

If you want to find out the reasons you might use each, the pros and cons, why interest rates are NOT the best way to make your decision, and the #1 most important thing you need to make sure you're in the position of maximum control ... tune in now!

Table of contentsWhy Pay a Finance Charge? How Does a Policy Loan Work?What is a Withdrawal from Your Cash Value?How is the Interest on a Policy Loan Calculated? Are Interest-Only Payments Better?The Benefit of Unstructured PaymentsBook A Strategy Call

Why Pay a Finance Charge? 

One of the major objections to the Infinite Banking Concept is, essentially: Why should I pay to access my own money? Generally, with an IBC strategy, the way to access your capital is by leveraging it via a policy loan. This means that you offer your cash value as collateral for a loan from the insurance company. Because it's a loan, you pay interest on that loan.

This isn’t an unreasonable question. In fact, it’s a good question to ask of any financing method you use. The right solution will depend on how much capital you need, how much you have, what you want to do, and more.

But in general, accessing your cash value through a loan is a good option because you have control. Some of the benefits of a policy loan include:

The flexibility to use that money on anything you want.Tax-free use of your money (* as long as the policy stays in force and does not become a Modified Endowment Contract).Full compounding interest on your cash value because you aren’t withdrawing.Control over when and how you pay the loan back.No application process. This means you can leverage a policy loan in ways you might not do with a bank loan.No credit check, and no impact on your credit report when you take a policy loan.

How Does a Policy Loan Work?

If you want to access your cash value without a withdrawal, you can get a loan from the insurance company’s general fund. The company then puts a lien against the policy value, or the amount that you want to borrow against your policy. When you pay back the loan, you’re paying interest to the company. As you pay back the loan, the lien against your policy is reduced, which frees up your cash value to be used again, if you so wish. 

When you take a loan, the company only collateralizes your policy for the amount of that loan. So if you have $200,000 of cash value and you just want a $10,000 loan, the company only uses $10,000 as collateral. This means that if you take that $10k and a few months later have a $100k opportunity, you still have that available to take another loan.

What is a Withdrawal from Your Cash Value?

Instead of taking a loan from the insurance company, you can actually remove money straight from the policy values. If you withdraw less than your cost basis (the equivalent of what you’ve paid in premiums), you can access the money tax-free. However, when you take out more than what you’ve paid into the policy, you cause a taxable event. The IRS sees this as growth on the policy, and is, therefore, taxable income when you take it “no strings attached.” Unlike loans, withdrawals cannot be paid back and thus permanently reduce your policy values.

How is the Interest on a Policy Loan Calculated? 

If you’re wanting access to capital and thinking about a loan, you’re likely to compare interest rates between lenders and companies. Insurance companies often have competitive rates, at least compared with 3rd party lenders and banks. (However, in some cases, bank and 3rd party interest rates have been lower than policy rates.)

Generally, insurance companies calculate their interest rates based on Moody’s Bond Index, which is a series of bonds that they look at. These bonds help determine what general borrowing costs are. The board of governors then use this information to determine a competitive rate. Insurance companies use the MBI to set a rate once a year. 

Right now, in 2022 for example, the bond rate is about 5% and insurance companies are capping their rates at about 8% depending on certain factors (such as whether they offer variable rates, etc). 

Are Interest-Only Payments Better?

One reason 3rd-party loans against an IBC policy are attractive is because people believe they can make interest-only payments. When people hear this, they believe that they don’t have to make large payments, and can save money in the long run. However, the problem with interest-only payments is that you’re not freeing up your cash value when you only pay interest. 

If you take a policy loan directly through the insurance company, any payments you make are on the principal. This means as you pay down your loan you free up your money to use again. The benefit here is as we mentioned earlier: you’re freeing your money up for future opportunities and/or emergencies. 

The Benefit of Unstructured Payments

One of the many things that sets life insurance policy loans apart from banks and 3rd party lenders is that you have unstructured payments. This gives you the flexibility and control to pay back when and how you choose. This means if you want to pay every other month, you can. If you want to shoot for paying your loan in 5 years or 20 years, you can. You have limitless options to access your cash value, so long as you make some payments to free up your cash value for future use. 

A common example of how this may work is if you use a policy loan to fund a real estate purchase. Say you buy a single-family home with the intention of flipping it for a lump sum. You could do this, and pay the loan back in full after you complete the sale. However, you may also change your mind and decide to rent out the home, and use the rent money to pay back the loan in installments. Either option can work great and is totally up to you. 

Book A Strategy Call

Do you want to coordinate your finances so that everything works together to improve your life today, accelerate time and money freedom, and leave the greatest legacy? We can help! Book an Introductory Call with our team today at https://themoneyadvantage.com/calendar/ and find out how Privatized Banking, alternative investments, or cash flow strategies can help you accomplish your goals better and faster. That being said, if you want to find out more about how Privatized Banking gives you the most safety, liquidity, and growth… plus boosts your investment returns, and guarantees a legacy, go to https://privatizedbankingsecrets.com/freeguide to learn more.

Most people don’t see the need for life insurance in their later years, let alone the benefit of whole life insurance in their retirement plan. By retirement, you may expect to have your home paid off, and not have the same income needs as before. You may even decide you're not retiring at all if you can help it.

https://www.youtube.com/watch?v=1kq9rC5nw6I

Even still, there are tremendous advantages to whole life insurance that lasts for your whole life. This includes having insurance beyond what most consider their life insurance needs. For many people, retirement planning with whole life insurance isn’t just about protection - it’s also a way to build reliable retirement savings that complement other income sources.

Tune in today for this eye-opening conversation with Dr. Wade Pfau about the three key benefits of retirement planning with whole life insurance.

Table of contentsThe Nature of Retirement IncomeThe Benefits of Whole Life Insurance in Your Retirement PlanHow Does the Volatility Buffer Work?Inflation RisksBuilding a Retirement Income PlanThe Reality of Stock Market ReturnsWhole Life Insurance In Your RetirementLinks ReferencedAbout Dr. Wade PfauBook A Strategy Call

The Nature of Retirement Income

[5:19] “What makes retirement income different is that the nature of risk changes… just in looking at how the investment world approached retirement income, I developed concerns.”

Those concerns led to Dr. Pfau looking into assets that are traditionally not considered retirement assets, like life insurance. Life insurance isn't common in retirement plans because many people don't believe they need it anymore. However, life insurance has benefits that many people don’t consider, and aren’t taught to consider. 

[5:56] “In the risk management context of retirement… potentially looking at different tools, not just using only an investment portfolio to fund retirement expenses, can help lay that foundation for a better retirement outcome.”

When you only have investment assets for retirement, you have a sequence of returns risk. This means that you risk significant losses because you can’t time the market in retirement. After all, you’ve got to take your income to eat and pay bills.

Retirement income usually comes from several sources, including social security, pensions, investment withdrawals, and whole life insurance retirement income. Balancing these streams helps reduce risk and creates a more predictable cash flow in retirement.

The Benefits of Whole Life Insurance in Your Retirement Plan

The value of whole life insurance is that “the cash value is not exposed to the risk of loss,” as Wade says. The cash value is a non-correlated asset and grows no matter what is going on in the stock market. 

[7:25] “It can provide a resource to cover spending on a temporary basis during this kind of bad market environment so that you don’t have to sell from the portfolio to fund spending... Well, then that gives the portfolio an opportunity to recover and to make up those losses again before we have to go back to selling from it.”

[8:01] “Ultimately the benefits [of whole life insurance] to the portfolio exceed the cost of the insurance to give a better net outcome, especially when we consider the tax advantages and so forth of life insurance.”

Some of the key benefits of whole life insurance in your retirement plan include:

Guaranteed cash value growth that isn’t tied to market swings

Tax-free access to funds through policy loans

A death benefit that supports long-term legacy planning

Protection against market volatility by acting as a non-correlated asset

How Does the Volatility Buffer Work?

A "volatility buffer," as Wade Pfau calls it, is an asset that can help your investments during market downturns. The idea is that after the market dips, you can pull income from your volatility buffer to minimize your losses and give the account time to recover. When you give your investments some breathing room, you can extend the life of your investment account by years.

An ideal asset for a volatility buffer is whole life insurance because it's flexible and liquid. Not to mention, the death benefit provides some protection for your estate and assets. Whole life insurance gives you some freedom to spend without disinheriting heirs, too.

For example, instead of selling investments after a 20% market drop, a retiree could draw from whole life insurance policy loans to cover living expenses. Once the market recovers, they can resume withdrawals from their investment portfolio, thereby preserving growth potential and avoiding losses.

Inflation Risks

In conversations about retirement, people often ignore the impact of inflation. The harsh truth is that due to inflation, you will need more money in the future to have the same financial impact today. The equivalent of a $100k salary now is going to be much more in the future.

[22:25] “Inflation has this permanent impact. Because if prices are up at eight percent this year, then even if inflation comes back down I’m still kind of working from this permanent base of eight percent higher expenditure needs, if my spending keeps growing with inflation.”

[22:45] “Inflation is creating more risk for the financial plan because I consider it more of a spending shock. It’s a situation where people have to spend more than they anticipated. And if[I anticipate] in my planning that inflation would be two or three percent, and I get hit with eight percent inflation, it’s requiring me to spend more to meet my retirement budget. And that’s putting more pressure on the financial plan because it’s making it harder for my assets to keep pace.”

One way to address this is through retirement planning with whole life insurance, since policies earn dividends  that earn uninterrupted compound interest and always increase over time. These rising values can help offset inflation’s impact and provide a more reliable income stream.

See also:

https://themoneyadvantage.com/protect-money-against-inflation/

https://themoneyadvantage.com/what-to-do-about-inflation/

Building a Retirement Income Plan

When building a retirement income plan, Dr. Wade Pfau asserts that it comes down to a combination of what you value and how comfortable you are with risk. You can create a diversified plan by choosing a combination of stocks, bonds, and whole life insurance. Annuities can also provide some balance for retirees who desire contractual protection over their income. 

[16:28] “For anyone who’s worried they might live longer than their life expectancy—which is the age where there’s a 50% chance you live longer than that—anyone worried about living beyond that, the annuity will allow them to spend more than bonds will.”

[17:17] “The important point is, I think in the investment world there’s this notion that it’s very easy for stocks to do so well that they just blow away the value of an annuity. And the reality is that’s not the case. This risk pooling that insurance can provide allows for a lot more spending than bonds in a way that’s competitive with the stock market.

I mean, if the stock market does very well, it would outperform the annuity. [Still], if the stock market does average, then the annuity is going to be right alongside it in terms of the ability to fund a spending goal over a long retirement horizon.”

In practical terms, whole life insurance can supplement retirement withdrawals during down markets, giving investment accounts a chance to recover instead of being drained at a loss. It can also provide a tax-advantaged income stream through policy loans, which adds flexibility when coordinating different sources of cash flow. 

For example, a retiree could pause investment withdrawals in a bear market and draw from whole life insurance for retirement savings instead, reducing stress on their portfolio while maintaining a steady income.

For more on the tax angle, see our guide to Tax Benefits of Whole Life Insurance.

The Reality of Stock Market Returns

[27:42] “Over time, the growth rate is not equal to just the average return over time… If the portfolio is down twenty percent, so you go from 100,000 down to 80,000, you would then need to have a 25 percent gain to get back to where you started. And if you’re furthermore spending from the portfolio, that’s even further ramping up the gains that you would need to offset so that you can get back to your initial portfolio value.”

[28:!5] “There’s a popular radio host who talks about 12% stock market returns. But he’s completely confusing this point. That’s not a growth rate over time, that’s a historical [average]---I take all the historical stock returns and divide by the number of years, and I get 12% on the S&P 500. But if I’m going to invest in the S&P 500, the historical growth rate is much lower."

[39:55] “Not that I’m going to try to time the market and abandon stocks, but I’m just going to work from the assumption that stocks will provide a lower return and so I can’t rely on 7 or 8 percent type returns for my financial plan.”

Whole Life Insurance In Your Retirement

[42:55] “Because I’m from the investment world, I was skeptical at first. And when I first started looking at it, there was some naïve analysis out there of basically just introducing an extra life insurance policy at retirement.”

While permanent life insurance has higher premiums, it fulfills a need and allows you to create a volatility buffer. It has a lot of flexibility that helps you protect your portfolio, even though it may restrict what you can contribute to your investments. However, you will likely be in a better, more protected position if you have the insurance than if you don’t. You’re also more likely to leave a greater legacy. 

Ultimately, when you’re coming up with your retirement income plan, the question is,...

Have you heard about the Infinite Banking Concept and want to learn more? Or maybe you’re already using Infinite Banking but would like to be able to explain it better. Today we’re unpacking the question: What is the dividend? 

https://www.youtube.com/watch?v=5yL_jW4q48E

If you’ve ever wondered how the cash value grows through dividends and how life insurance dividends differ from other types of dividends… tune in now!

Table of contentsWhat is the Dividend?Why Do I Need a Mutual Company for Infinite Banking?How Does the Dividend Grow My Policy?How Does the Dividend Relate to the Guaranteed and Non-Guaranteed Policy Cash Value?What Income and Expenses at the Life Insurance Company Determine the Dividend Rate?Why Shouldn’t I Compare Companies?How is the Dividend Applied to My Policy?Can Dividends Change in the Future?When Do I Receive Dividends?Why Are Dividends Applied Differently Amongst Policyholders?What is the Best Option for Infinite Banking?

What is the dividend?Dividends are the distribution of a mutual life insurance company's profits to its whole life insurance policyholders. Mutual companies declare their dividend rates annually.

What is the Dividend?

Dividends are the distribution of a mutual life insurance company's profits to its whole life insurance policyholders. Mutual companies declare dividends annually.

The IRS defines it as a "return of premium." This, however, is how the IRS can classify why dividends distribute tax-free.  

Why Do I Need a Mutual Company for Infinite Banking?

When you’re with a mutual company, you’re participating in the company's profitability via dividends. When the company profits, it’s going to benefit you because you're a policy owner. This means you want the company to be as profitable as possible.

To recap an earlier episode of our infinite banking series, policyholders are partial owners of mutual companies. Stock companies, on the other hand, are owned by stockholders. In the latter scenario, companies will act in the best interest of the stockholders, even if it’s not in the interest of policyholders. Choose a mutual company to get dividends and work with a company that acts in your interests. 

How Does the Dividend Grow My Policy?

Dividends are one of the major drivers of growth in a policy. The cash value increases in three ways: natural equity by paying premiums, the guaranteed interest portion, and dividends. While the latter is not guaranteed, they are highly anticipated. 

How Does the Dividend Relate to the Guaranteed and Non-Guaranteed Policy Cash Value?

On a life insurance illustration, there are columns representing your guaranteed interest growth and the non-guaranteed growth they project you will receive. So while the former is what you can expect no matter what (since it’s guaranteed), the latter is the growth you can anticipate. 

Additionally, the non-guaranteed column on an illustration will not show any dividends applied at all. Therefore, it’s a highly inaccurate way of looking at a policy illustration. Most mutual companies have paid dividends every year for the last 100 years or more. Another benefit is that once companies pay it out, it becomes guaranteed. In other words, once the floor of your policy increases, it cannot decrease. 

What this means is that life insurance illustrations become inaccurate every year. Since both the guaranteed and non-guaranteed columns adjust to represent what actually occurs, and the declared dividend changes each year, the projections inevitably shift. Yet they never decrease from the “floor” of your policy. 

What Income and Expenses at the Life Insurance Company Determine the Dividend Rate?

Dividends are profits paid to policyholders. However, they are declared and applied after other income and costs are accounted for. 

So, for example, a life insurance company has to account for payroll expenses, agent commissions, and mortality costs (how many people died). However, the company is also earning and investing money through premiums. Companies hold most premiums in bonds, but also invest in real estate and a minuscule portfolio of equities. Companies also earn a profit from policy loans. 

The balance of profits and costs is used to declare dividend rates for the following year.

Why Shouldn’t I Compare Companies?

Every life insurance company has its own proprietary way of running the company. So while the big picture operations may be similar, the exact formulas they use to apply dividends and calculate policy growth may differ. Similarly, each company has its own way of investing. While mutual companies tend to make very conservative investments, their exact profits and expenses could differ between companies. This may result in different dividend rates and applications. 

How is the Dividend Applied to My Policy?

Many people get caught up in the “rate” of the dividend, but how the company applies it to your policy is more important. Much of the dividend application is proprietary. However, it's possible to come out with a better result from a company that has a lower rate. For example, companies may apply dividends differently to newer policies or policies with many loans. It’s better to get started with a policy somewhere than to get so caught up in the line-by-line dissection of illustrations.

Can Dividends Change in the Future?

Once a company declares a rate for the year, it cannot change. However, dividends do change from year to year. This means that life insurance illustrations become outdated after a company declares a new dividend. They also lock in once you receive them, and companies cannot remove them from your account.

When Do I Receive Dividends?

Dividends are declared annually and applied annually. The declaration of dividends generally occurs at the end of the calendar year. The life insurance companies apply them to your account on your policy anniversary. So if your anniversary is May 1st, you will receive dividends every May 1st. 

Why Are Dividends Applied Differently Amongst Policyholders?

Not every policyholder gets the same dividend, which can be confusing. Determining your policy growth is not as simple as adding an even percentage of your cash value. 

The exact calculations are proprietary. However, you can expect that the dividend is applied differently to the cash value accumulated via base premium vs. cash value accumulated via PUAs. You can also expect them to be applied differently to a child’s policy than an older adult’s. This is because policies are designed so that the cash value equals the death benefit at age 121. If, theoretically, a child received the same application of the dividend, their cash value could grow exponentially beyond what is possible for the company to guarantee. So they apply it in a way that makes room for realistic compounding.

What is the Best Option for Infinite Banking?

You can choose to receive the dividend in a variety of ways. However, for infinite banking, we recommend setting up your policy so that you can use it to purchase additional paid-up additions (PUAs). 

Paid-Up Additions are smaller, “paid-up” amounts of death benefit that you can add to your policy. This directly translates to a higher cash value and a higher death benefit. So as your cash value increases and compounds, you’re actually increasing your future death benefit over time, too. 

Book A Strategy Call

Do you want to coordinate your finances so that everything works together to improve your life today, accelerate time and money freedom, and leave the greatest legacy? We can help! Book an Introductory Call with our team today at https://themoneyadvantage.com/calendar/ and find out how Privatized Banking, alternative investments, or cash flow strategies can help you accomplish your goals better and faster. That being said, if you want to find out more about how Privatized Banking gives you the most safety, liquidity, and growth… plus boosts your investment returns, and guarantees a legacy, go to https://privatizedbankingsecrets.com/freeguide to learn more.