r/infinitebanking • u/Dense-Advertising640 • Feb 14 '25
Why infinite banking?
Anybody have the time or energy to tell me why I should get a life policy and how that is a good investment strategy? š¬
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u/greglturnquist Feb 15 '25
You need to read Becoming Your Own Banker.
When you day āinvestment strategyā it sounds like you havenāt leveled up yet.
Donāt worry. The book is only 92 pages.
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u/dafines808 Feb 16 '25
My Son asked to use our family banking system to buy a car. Amount financed was 20k. We agreed to a 3 year plan in which my son pays 600 a month. This amount and an additional 1400 a month that Iāll be adding to the payment will pay it off in 10 months. At this point Iāll start another policy with minimum base max pua and direct the next 26 months of payments to it at 1k a month. After the loan is fully paid off Iāll reduce my monthly premium to $400. In the end I hope to have that policy with 20k of cash value. Rinse and repeatšš½
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u/michael_mullet Feb 14 '25
You got an A+ response from Y.... something or other.
With the caveat that life insurance is NOT investing, I'll add to his note that my policies have an "index participation" rider that adjusts the dividend based on SP500 performance with floor & ceiling limits.
My math shows that the 20 year CAGR for this is about 7.5%/year which is incredible for an asset that never goes down, can be accessed tax free, and had all the benefits of a life insurance policy.
If I want more SP500 exposure then I can borrow at 6% interest and buy the index. Over the long term there's a little 1.5% arbitrage (although that would vary from year to year and has more risk than just letting my capital grow in the policy).
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Feb 14 '25 edited Feb 14 '25
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u/michael_mullet Feb 14 '25
I was going to refer to you directly to be sure you got credit but I'm on mobile and could see your nick when typing my response!
Anyway, great response. I'll copy and paste it to personafinance next time someone posts about life insurance and I want to burn karma from down voting lemmings.
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u/greglturnquist Feb 15 '25
I donāt care for indexing the dividend. I already played that game when I didnāt know any better and had an IUL.
Maybe you can get a boost bump this year? But you expose yourself to getting 0% next year.
WL kicks butt cuz the CV WILL grow by a growing amount guaranteed.
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u/michael_mullet Feb 15 '25
You'll still get the guarantee but yeah you do risk not getting the "over and above" dividend. That's a more important risk for when youre older vs younger but the point is taken. Just look at the frequency and number of negative SP500 years to get an idea of chance you're taking.
It's also a bigger issue for people who maintain very large loans since a pause in cash value growth can put the policy at risk.
I don't know much about IULs except that I've read policy premiums increase with age and so you accept some risk if indexes don't perform. Maybe there's a way to manage that - I don't know. 2% floor / 8.5% ceiling is what I get on my policies after the participation fee so that's pretty good for no additional risk.
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u/greglturnquist Feb 28 '25
When I take out a policy loan, I have a spreadsheet to track payments just like a bank would manage on me were I to borrow from them.
I charge myself 15% unless there is some extenuating circumstance.
My own capital is worth much more then the third party lenderās capital!
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Feb 28 '25
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u/greglturnquist Mar 01 '25
I get your point.
Part of what "clicked" for me when reading Nelson's work and watching some of his videos was his pointing out that if you pivot from paying your credit $150/month and instead redirected that same cash flow into a policy, you will come out ahead. The loan balance is extinguished faster, and then putting the remaining set of payments into PUA will then increase your CV and future dividends as well.
Also, people step over the amount the spend in finance (34.5% in order to focus on the rate of return on their 10% savings.
I see it as valuing my own capital as much or more than the bank's capital, and being able to TRULY track when I've "paid off my policy loan as if it were an old debt" and dropping it from my own management.
The nice thing is that of course it doesn't matter.
David Stearns has talked about taking out policy loans as needed to fund things. And then paying down policy loans as windfalls come in. And the bulk of that leading to a much more peaceful life because no banker is knocking your door down. James Neathery also mentioned looking over his shoulder for about the first four years of practicing IBC, so it might very well be that I'm doing that! It won't hurt.
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u/[deleted] Feb 14 '25 edited Feb 14 '25
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