Thursday, July 30, 2020

IBC: Planning For Your First (or Next) IBC Policy

Sometimes it's not possible to get started with an Infinite Banking designed Whole Life policy right away.

One of the main reasons could be due to cash flow but it’s possible a convertible term policy would be an option to consider if the minimum monthly contribution of $500 is not in the cards just yet to get started with IBC.  

Instead you could budget $20-50 a month for a 10 year term policy now.  Your age, health rating, and amount of death benefit will ultimately determine your monthly premium.  This would guarantee you have the ability to start an IBC designed Whole Life policy by locking in your insurability today so that you can get started anytime in the next 10 years. 

There is also a credit for the previous 12 months of premium when the term policy is converted to an IBC designed Whole Life policy.  If you are married and/or have kids, the death benefit from the term policy gives your family added protection.  If you are single, then the convertible term policy is merely to guarantee your health so that you qualify for the IBC Whole Life policy when ready.

I started in the life insurance industry in 1998.  I’ve seen a number of people wait to get started for various reasons only to lose their health (prostate cancer, stroke, diabetes, complications from a car accident, etc.). I’ve seen a lot of bad luck happen to good people.  For that reason, I believe you should at a minimum consider a convertible 10 year term policy.

This type of pre-IBC planning is what I refer to as "Future Planning".  It also works great if you already have one or more IBC Whole Life policies.

I keep a $2m term policy on myself despite owning multiple IBC designed Whole Life policies.  I keep it available so I know with 100% certainty I can open my next IBC policy even if my health changes for the worse.

And when I eventually convert my existing term policy to Whole Life, I'll also look to obtain another 10 year term policy so I can repeat the same process for the next 10 year window of my life.  

You may ask yourself why a 10 Year Convertible Term? The reason is that in my experience, people who undertake to practice IBC convert all of the death benefit in their term policy on average by the 5th year. Unless you feel a need for a substantially longer term period, a 10 Year Convertible Term works extremely well for it's ultimate planned use which is conversion to an IBC designed Whole Life policy.

If you would like to learn more about getting yourself set up for your first or next IBC plan, let me know.  You can find me here:

Thank you,

John Montoya

Sunday, July 12, 2020

Are You Thinking About Retiring Early?

Life doesn’t always go as planned, and if you’re currently navigating a new set of circumstances that has led you to consider an earlier retirement, it’s important to proceed carefully and thoughtfully.

Is it possible for you to retire early? If so, what’s the best way to go about it?
To start, take a look at these basic considerations and reach out if you’d like to check in.

Strategize Social Security

You may be able to start collecting Social Security at age 62, but many people choose to hold off if they’re able to. Waiting until your full retirement age (which depends on your birth year) or up until age 70 will lead to an increase in benefits.

Rebalance as Needed

Whether it’s by re-examining your portfolio or shifting more assets to cash (or both), try to make sure you’re finding the right balance and reducing risk as needed.  

One of the best ways to reduce risk is to consider an indexed annuity as part of your overall portfolio.

Indexed annuities do 2 things extremely well:

  1. Principle protection with upside growth
  2. Offer guaranteed lifetime income streams

Create a Withdrawal Approach

While many retirees aim to withdraw around 4% of their investments in the first year of retirement and adjust the amount for inflation going forward, there are no set rules for success. 

In fact, most fiancial pundits are now saying because of market volatility you should withdraw no more than 3% per year in retirement to avoid running out of money.  You may decide to withdraw more or less depending on your budgeting habits and age. 

To see where you stand now, multiply your current savings by 4% and divide by 12 to find what your monthly income amount would be.

If you are needing a withdrawal rate greater than 4% to ensure you won't run out of money in retirement, this is another reason to consider an annuity which typically have withdrawal rates greater than 4%. 

Other Factors

Don’t forget about additional considerations like health care and taxes. Overall, it’s important to sit down and calculate your anticipated monthly expenses (including a cushion for anything unexpected).

Do you need assistance mapping out your short-term, mid-term and long-term goals? It's extremely important that you make sure your guaranteed income in retirement covers all expenses.  Reach out anytime to discuss your questions here:

Thank you,

John Montoya

Tuesday, June 23, 2020

How Accountable To Your Wealth Are You?

"Only when the tide goes out do you discover who's been swimming naked."  - Warren Buffet

There has never been a better time to look at your finances then the present pandemic.

We've seen the market drop precipitously only to experience the best 50 day run in history.  Meanwhile, new unemployment numbers are in the millions and increasing each week.  The dichotomy of between what's happening on Wall Street and Main Street has arguably never been as stark as it is now. 

If you've been exposed in 2020 by a lack of liquidity (access to cash) and seen your overall net worth drop by greater than 15% in 30 day time frame, then now is the perfect time to rethink and reshape the foundation to your financial plan.  

There are critical elements this pandemic has exposed in the traditional financial model.  For the purpose of this article I'm going to focus on one area you probably give little thought to:

Your Savings Strategy


What does your savings strategy look like?  

Do you save in a traditional bank?  Is your savings really an investment plan like a 401k?

These are important questions because whether you save your money in a bank or a government qualified retirement account, you've exposed your money to at least of 1 of the 3 main Wealth Destroyers that are eating away at your net worth.  

3 Wealth Destroyers

  1. Risk:  Can you lose money?
  2. Taxes:  How much of the growth do you keep?
  3. Inflation:  Are you staying ahead of the invisible tax that reduces your purchasing power?

(There's also a 4th Wealth Destroyer which I'll get to in a moment)


Does your savings strategy make you more accountable, more efficient, and more profitable?

Let me ask you in a different way so you can better understanding of what I mean.  

How much value do you place on cash? 

For most people, the value is very low.  

If you pay cash for large items, you likely don't save money on a planned schedule.  You simply save what's necessary for your next big purchase or emergency.  This is important because not having a systemized plan means you place very little value on your saved dollars.

Think of it this way, when you borrow money from a traditional bank, you pay interest.  If you save money, you expect to earn interest.  Yet, when you use your saved dollars, you don't put any value on that money but this is a HUGE MISTAKE because of the opportunity cost of paying with cash from your traditional accounts.

Remember, you either pay or earn interest.  Paying with cash means you give up the ability to earn interest on that cash forever, and this is true even if you are great at replenishing your savings account!

You save up, spend, and start all over.  Rinse, Repeat.  It looks like this:

Let's now plug a high early cash value (Infinite Banking) Whole Life policy into the equation and see how it holds up to the 3 previously mentioned Wealth Destroyers.  

  1. IBC Whole Life policies eliminate market risk,
  2. IBC Whole Life policies remove the taxes on the growth, use, and transfer of those dollars,
  3. Cash Values (and the future death benefit) are increasing at a pace that stays ahead of inflation,

and you have a Savings Strategy that incorporates an asset class that overcomes the 4th Wealth Destroyer:

The Constant Interruption of Growth

If you don't think this is important, ask yourself this:

How much money will pass through your checking/savings account in your lifetime never to be seen again? It's a large amount of money, am I right?!?  Wouldn't it make sense to allow that money to work for you all of your life rather than disappear forever?

When you use cash value to fund your lifestyle, pay for your kid's education, start or grow a business, or even prepare for retirement, you own an asset that you can use and re-use without interrupting the compounding curve of your saved dollars.

This is because cash values continue to grow on the full value even when there are loans taken.  You can't get uninterrupted growth with a traditonal bank account or 401k/IRA.

But to really make IBC work, you need to be accountable to your wealth!

A little discussed benefit to having an Infinite Banking Whole Life policy is how the use of this type of Savings Strategy makes you more accountable, efficient, and even more profitable than the traditional savings plan you currently use.  

People who don't understand how cash value life insurance works scoff at the notion of taking policy loans because they place little to no value on their saved dollars.  They don't know what they don't know...

Utilizing policy loans are critical to building your net worth because taking and repaying policy loans forces you to be accountable to your money, including when you use the cash values for investing.

On the point of using IBC for investing, my IBC Whole Life policies don't restrict me from making investments.  On the contrary, accessing the cash value via policy loans have made my investments more profitable by using leverage available in Whole Life policies to create two assets from the same dollar.

Here's the main point:

IBC forces you to replenish your wealth so that you never liquidate your savings without any intention of keeping it growing. 

If you are serious about accumulating wealth that can overcome all 4 Wealth Destroyers, it's imperative you evaluate your current savings strategy to be sure you setting the proper foundation for building wealth that can endure any financial storm.

And don't forget, just because a Whole Life policy is an unmanaged asset (it has guarantees and it can't lose money based on market whims), "practicing IBC" means you need to practice being accountable to the dollars you save!

Chances are you are already a good Saver.  You're just not saving in the best spot!

If you have questions about your current IBC plan or are looking to get started with IBC, you can connect with me here:

Thank you,

John A. Montoya

Thursday, May 21, 2020

401k Employer Match - Food for Thought

"Any necessary change in your life will involve the way you think and your willingness to change the way you go about it." - Nelson Nash

I'm thinking about 401k's and the match some people receive from their employers and I wanted to share this thought with you.

If you stop to really think about it, the employer match to a 401k isn't "free".  It's certainly nice to think of it that way.

However, if you're thinking like a business owner, the truth is that is that match in a 401k plan is really part of the employee overall financial package.  It is part of your overall gross pay.

Some employers provide really great benefits and the trade-off is a lower salary.  It's no different with a 401k match.  The match is a benefit but ultimately it is part of your compensation package.

There is no free lunch.  Period.

Whether you choose to accept it is entirely up to you.

Think of it like a gift card.

Businesses love gift cards because many gift cards are never used.  Some get tossed without ever using the entire balance.  This is especially true with gift cards that may have an expiration date.  That's money the business can eventually re-purpose elsewhere.

When you don't opt to take advantage of the 401k match, that's part of your compensation package you're leaving on the table.

Just don't consider it free.  It's yours... if you want it.

The big question: is the match worth it?

Instinctively, yes....right?

If you understand and practice Infinite Banking, there's definitely more debate about the merit of the 401k match however.

After all, accepting the match means locking up your contributions until age 59.5.  That's money no longer in your control, prone to losses, 2-3% in 401k and mutual funds fees per year (smaller companies have the most excessive fees due to economies of scale), and ultimately a permanent tax lien upon withdrawal.

Also, that employer match potentially means you'll have more in your 401k account.

Great, you say but you will also have a higher probability of paying a larger % of taxes upon your withdrawal.  That match is essentially extra revenue for the IRS. 

(This is simply human nature to pursue self-interest, not conspiracy-- when Wall Street earns a guaranteed fee on every dollar you contribute for the life of the plan and the government is waiting to collect their portion, too, do you ever stop question their motive in recommending you be all-in on maxing out your 401k?)

Suddenly you begin to realize the match isn't really a 100% no brainer like conventional wisdom would want you to believe.

It's my experience that the prevailing convertional financial wisdom has a way of leading people into financial bondage instead.  This is what happens when society turns to government solutions instead of figuring things out on our own.

Government, banks, and Wall Street absolutely all have something to gain by your continued participation.  The wise consumer will look to protect their money from prying hands (fees and taxes) by looking at every dollar they save as their own personal property.

A 401k/IRA is bit of lobster trap if you ask me.  (Understatement of the year.)

If you decide there's no other choice than a 401k or IRA, it will be the best you can do.

But is it the only option?

Of course not.

IBC proves this because it is a private contract between two private entities, you and a mutual-based life insurance company (owned by you-the policyowner!).  When you capitalize your own pool of money within a dividend-paying Whole Life policy, you're actually choosing a tax-favored property that when used properly can help minimize taxation and grow wealth uninterrupted, even while you use the money elsewhere!

The more you learn about IBC the more you will actually be forced to think like a business owner.  Whether you run your own business or not, you must realize there are 2 businesses you should participate in.

The first business is currently what you do for income.  The other business should be the eternal business of banking.   You are already a bank consumer.  The difference is you shop at a bank you don't own or control.  Might as well understand how banking works so you can benefit from acquiring your own pool of money to build your wealth.

It's a pretty simple solution to life's biggest financial problem (the ability to save more than you spend) once you realize there is another option than a 401k.

Pop Quiz

1. How much money do you save each year?
2. How much do you spend on fixed expenses (car loans, rent/mortgages, taxes, vacations, tuition, etc) each year?

Are you saving more or spending more?

The average person spends 3.5x more than they save but they have been conditioned to focus on the smaller amount never realizing they have the ability to take control of the larger amount to create wealth.

Pick up a copy of Becoming Your Own Banker by Nelson Nash if you haven't already.  It is an essential starting point to guide you on a path of your own making, towards a financial lifestyle that you ultimately can control by eliminating the IRS, banks, and Wall Street from your life.

"Action is preceded by thinking.  Thinking is to deliberate beforehand over the future action and to reflect afterwards upon the past action.  Thinking and action are inseparable.  - Ludwig von Mises

Thank you,

John Montoya

Wednesday, May 20, 2020

IBC Mailbag: 3 Ways To Access Money from a Whole Life Policy

The following is an email reply to a new client requesting to access money for the first time.  This client emailed me requesting to "withdraw" money to pay off a car loan.

Hi ______,

So I’m going to be a bit of a nerd here because I want to be sure we are using the correct wording/terminology.

The best way to access funds is via policy loan because it doesn’t interrupt the compounding effect of the money in the policy and it is also a non-taxable event.

Withdrawing money physically removes your own money from the account and interrupts the compounding effect. 

I explain accessing money from a Whole Life policy this way to keep it simple:

There are 3 ways to access money

  1. The Sad Way
  2. The Dumb Way
  3. The Smart Way

The sad way is you pass away and the beneficiary gets the death benefit.  Let’s avoid that for as long as possible!

The dumb way interrupts compounding growth. 

The smart way, as mentioned, doesn’t interrupt the compounding growth of the cash values and is tax-free.

Utilizing the "Smart Way" allows you to be your banker.  You are essentially replacing the car finance company from the equation.  All the payments you would send to the car finance company will now be returned to your banking system (the whole life policy) where it will earn a guaranteed tax-free rate of return for the rest of your life!

All of this is possible by becoming your own banker through a dividend paying whole life insurance policy.  Why pay other financial institutions when you don’t have to?

So all that shared, it will take 3-5 business days upon request of the loan to see it in your checking account.  You’ll need to provide the insurance company with a voided check if they don’t have a checking account on record for you.  Also, I strongly recommend setting up a monthly draft for the policy loan repayment for at the least same amount you were sending the car finance company.  It's important to be an honest banker with our own money.  Please refer to the Grocery Store analogy in the Nelson Nash's book Becoming Your Own Banker.  I can help explain the analogy further if you like.

If I can assist with anything I’ve explained here, please let me know.  You can reach me here:

Thank you,


Sunday, May 17, 2020

The Best Place for Money: The Misunderstanding of Whole Life Policies

FOREWORD: Keep one thing in mind before you read my latest blog post.  Failing to understand the mystery of banking doesn't prevent it from actually working.  A banking system will work whether you "get it" or not.  Even from my own personal experience, the biggest hurdle to IBC is the paradigm shift in thinking.  I completely acknowledge IBC is the opposite of how we are taught to think about money.  Failing to fully understand how IBC works is a reason some people never get started with IBC which is a shame.  I've written this post for those who struggle to "get it".  

My parents raised me with a passport savings account and “cashed in” my Gerber Baby whole life policy surrendering it at age 18 so I’d have some additional spending money when I went away to college.  Most people are handed down the same sad lessons that seem like good common financial sense at the time. 

What we fail to learn about money is that the business of banking is the most essential and eternal business that exists.  There will always be a need for banking.  Unless we solve for our need to bank (access large amounts of capital on our own terms), we must rely on the traditional banking system to handle it for us.  Nelson Nash, creator of Infinite Banking, said we all should be in two businesses:  whatever we do for income and the banking business.  I believe he was right.  Alas, not even 12 years of mandated public schooling or higher education teaches us anything about the essence of banking.  Sad.

It’s rather ironic to me now.  We are taught at an early age to trust the bank with its perceived safety (FDIC is underfunded) and borrow from the bank (we are consumers after all, yet we shop at a bank we don’t own).

At what age do we begin to realize we are just borrowing back our own money – pooled together with other depositors? 

We are also taught we don’t need life insurance except to replace income and the narrative says life insurance is the worst place for money.  In actuality, the life insurance industry is a safer place for money than banks.  It’s telling that banks keep their tier 1 reserve assets in ultra-safe, ultra-liquid Bank Owned Life Insurance (BOLI) policies and turn around to recommend CD’s and mutual funds to us.

Beyond just replacing income in the event of premature death, properly structured whole life policies also provide an immediate and available source of capital which can be used for an “infinite” number of reasons for all of life’s milestones.

No need to ask bank loan officers or 401k administrators permission for a loan.  And IBC is all accomplished while earning a guaranteed and compounding tax-free rate of return.

As Nelson repeated over and over again during his lifetime, "Eliminating traditional banks from one’s life is the most stress-free way of living."

It’s a strange thing that IBC has worked for so long hiding in plain sight and without the layperson actually having to know very much of the inner workings of a Whole Life policy (contractually guaranteed and 170+ year history behind it) but it does require a leap of faith into the unknown.  This was true even for me when I started my 1st IBC policy, a tiny $2300 a year policy because I thought it sounded just a little too good to be true.

I think the worse thing about IBC is that it uses a Whole Life policy as the account of choice.  It’s too easy to get hung up on the life insurance death benefit aspect and not see that a Whole Life policy works better than any other place for money (see chart above).  This is because a Whole Life policy replicates a traditional banking system in the most essential ways.

Sometimes learning requires the use of imagination.  I'm sure you are aware Shakespeare wrote “all the world’s a stage”.  If we are to use our imagination and look upon the business of banking as a play, you’d recognize four characters in the play are the same as with Whole Life:

  1. Depositor (Saver) – someone needs to save the money which is what we call capital.
  2. Debtor (Borrower) – there’s always need for money (cars, college, taxes, medical expenses, investment opportunities)
  3. Admin (someone needs to run the business operation)
  4. Bank Owner (Policy Owner) – someone will profit from a person’s need for capital (might as well be you and me)

We are playing 3 of the 4 characters in this play anyway.  Might as well call a Whole Life policy what it truly is:  a cashflow management system.  

If having a death benefit throws you for a loop, please realize the death benefit of a Whole Life policy merely ensures that the money in the policy is tax-free as it grows, is used, and ultimately tax-free again when it passes on to the next generation.  Congress has made it so.  It is all perfectly legal.  In fact, as mentioned Whole Life policies have been around a longer than the Internal Revenue Code (created in 1913 and expanded ever since).

The employees of the life insurance company (as with a traditional bank) do all the work to make Whole Life function.  No luck, skill, or guess work on our part. 

Time, money, and discipline do the rest.  (and perhaps a little bit of faith in getting started at first!)

If Congress passed legislation calling IBC designed Whole Life a 7702 Account (…that’s the actual IRS tax code about tax-free life insurance cash values) making it as mandatory as owning health insurance, society would be better off. 

Actually, a better name for IBC would be to call it an HSA account because it does what a tax-free HSA account does but better… because IBC has the whole life engine to give cash uninterrupted growth, collateral capacity (ability to take loans and repay on a flexible schedule), and of course a death benefit to pay off any outstanding loans at death.

Banking interests will never allow such a law like this though for good reason.

After all, why would people borrow from a traditional bank if they knew they could borrow all the capital they needed from their own banking system on a tax-free basis while earning a compounded rate of return?  The need for traditional banks would evaporate in short time and so to all the major conflicts in the world...

To understand the essence of banking, watch this Youtube clip from the movie The International:
Entertaining movie, by the way.

Are you ready to be your own Banker now?

To learn more and even get your first IBC policy started, you can find me here:

Thank you,

John Montoya

Friday, May 1, 2020

IBC Mailbag: How Safe Are Life Insurance Companies?

The following is an email I sent to a prospective client with nearly $500,000 in bank CD's who was requesting assurances on the safety of his money if he purchased a contract (life insurance or annuity).

I’ve attached an article I’d like you to read about the solvency of the Life Insurance industry.  (Here's the link:

Regarding the FDIC, it has an interesting history if you study it.  It was created during the Great Depression to alleviate people’s fear for a “run on the bank”.  Banks don’t keep the money you deposit in a vault.  They lend it out right away to earn interest.  Furthermore, banks have the ability to create money out of thin air.  This is called Fractional Reserve Banking.  Banks basically keep no more than 10% of your money on deposit, lend the rest, and thru Fractional Reserve Banking can even create more money out of think based on your deposit.  (Sidenote: due to the pandemic the Federal Reserve has actually lowered bank reserves to 0% meaning they don’t have keep any of our deposits on reserve!)

Think of how mortgages are created.  Banks don’t actually have the money but a signature on a mortgage note creates that money out of thin air.  Then people pay interest to the banks on money that has never existed before.   This is the true definition of inflation (the creation of new money).  Most people confuse inflation with the price of things but that’s actually the end effect when there is too much money in the system which forces prices up over time. 

So FDIC is a government created agency to backstop banks in the event there is a run on the bank panic.  However, the FDIC is actually insolvent.  It has maybe only a $100 billion in assets and this amount insures over $10 trillion in bank accounts across the US.  That said, the government could have the Federal Reserve print more money for the FDIC to bailout people’s bank accounts so there is that.  But for assurances, think about a bankrupt government with an agency (FDIC) that does actually have enough assets to provide a full reserve (that is restore all your money in the event of a bank failure).

The point is that FDIC is sticker of confidence and FDIC doesn’t actually have the money.  The government could make a person’s account whole but if it actually came to that, the money would not be worth as much because of the mass inflation it would cause with all the money printing.  On the positive, people trust FDIC and government to back up a failed bank system and that’s a good thing.  Otherwise, everyone would be running to get their money out of the banks and that would be a very bad thing for the economy.  So it works but it’s built on a very flimsy premise of trust. 

You can read more about how Fractional Reserve Banking works by reading a book called The Creature From Jekyll Island.  Great book.  You can find a link to the book on my website here:

The life insurance industry in comparison puts the banking industry to shame because the life insurance industry operates as a Full Reserve system.

By law, all life insurance companies in the United States must maintain 100% solvency (more assets than liabilities) at all times.  Industry average per life insurance company is 105%.  That means if every life insurance company had to pay off what’s owed, it would still have money left over to continue business operations. 

Also, life insurance companies cannot create money out of thin air.  They are inherently a safer place for money because of this but because people don’t know how the life insurance industry is regulated by law to be a full reserve system, people don’t think of a life insurance industry as a place to park money when it absolutely should.

Since 100% solvency is required by law for life insurance companies to operate, there is no federal safety net like FDIC required for life insurance companies.  In fact, no one who has ever purchased an annuity has ever lost a dime.  That is a fact the life insurance industry goes to great lengths to ensure because the life insurance business is based on promises to pay claims and benefits.

All that said, each life insurance company has a state safety net of minimally $100,000 and as much as $300,000 that works just like FDIC does for banks.  Life insurance companies are regulated at the state level which is why the government safety net is determined by the state you live in.  When you purchase an annuity, you instantly have this safety net guarantee.

Hopefully this gives you some food for thought.  I’ve included an article from Forbes which discuss the safety of the life insurance industry here:

Please let me know if you have any questions about assurances or any other topic I can help answer.  You can reach me at

Thank you,


Thursday, April 23, 2020

COVID message from Penn Mutual

The following is a message being relayed from Penn Mutual.  The message applies to all policy owners in need of assistance due to hardships caused by the pandemic.  If you have a policy with a different company and have questions, please let me know.

Dear Policyholder,
Recent amendments to insurance and banking regulations extend grace periods and give you other rights under your life insurance policy or annuity contract if you can demonstrate financial hardship as a result of the novel coronavirus (“COVID-19”) pandemic. These grace periods and rights are currently in effect but are temporary, though they may be extended further. For more information, please visit the Penn Mutual site for COVID-19 news and updates for policyholders.

At Penn Mutual, our policyholders appreciate our efforts to stay connected and provide relevant information that reflects our sensitivity to the challenges they are facing. Last month, we communicated that we are offering payment flexibility to our policyholders directly impacted by COVID-19 including:
  • Extending grace periods for premium payments
  • Not charging late fees, and
  • Allowing for up to 12 months to pay any missed premiums.

Please contact me with any questions at I’m here to help.

Thank you,

John Montoya

Tuesday, April 21, 2020

Falling Interest Rates, Hyperinflation, and Whole Life Policies

There have been questions about what the impact will be for life insurance companies and the Whole Life policy owners because of everything currently transpiring with the Coronavirus outbreak and the response by governments and central banks around the world.

Here’s one question that was recently asked: “How do Whole Life policies perform relative to rising and falling interest rates?”

Whole Life policies work in both rising and falling interest rate enviroments because the growth is based on two components.  First is the guaranteed interest.  Whole Life policy owners receive this interest growth no matter what.  It's baked into the cake so to speak.  

The other part of the growth in Whole Life policies are the dividends which fluctuate with the interest rate environment.  If interest rates are high, life insurance companies are earning a high yield and can pay higher dividends.  When interest rates are as historically low as they have been for the past 12 years, then life insurance companies have smaller yields with which to pay dividends.

The great news is that Whole Life policies have performed well over its 170+ year history.  (And they actually perform even better when designed for high early cash values utilizing the Paid-Up Addition’s rider via the Infinite Banking strategy which I'll discuss at the end.)

Here’s why the history of whole life policies have stood the test of time.

Insurance companies need to invest all the premiums they collect and their investment performance plays a large role in determining the surplus profit used to pay dividends to policy holders.

Something important to note is that life insurance can’t invest the way Wall Street firm invest because life insurance companies are in business of providing guarantees.  For whole life policies, there's the annual guaranteed interest to policy holders and ultimately a death benefit guaranteed to beneficiaries.  These guarantees mean life insurance companies have to be really conservative to ensure they have the assets to back up their promises.

For this reason as much as 90% of a life insurance companies portfolio is invested in corporate bonds and these debt instruments are typically held to maturity because insurance companies love cash flow.  And they love predictable cash flow even more. It’s not as sexy as chasing double digit rates of return like the typical Wall Street trader but the strategy produces predictablely consistent returns.  More importantly, it has proven work for life insurance companies which is what we want.  

Hiccups like what we’re experiencing right now in the stock market don’t have a short-term impact on life insurance companies and policy holders for this reason.

The interest rate environment whether rising or falling will influence future dividends but the shifts are extremely slow to manifest with life insurance companies.  Furthermore, interest rates are all relative.  If interest rates are low for life insurance companies, they are low for banks, too.  

For example, when interest rates were at rising in the late 1970’s/early 1980’s, dividends payouts followed gradually.  Whole Life policies actually had dividend rates higher than 10% in the 1980’s.  But as interest rates have been steadily falling for the last couple of decades, so have dividend scales.

Below are two charts showing the Prime Rate and the Federal Funds Rate.  The main take away in looking at these two charts are to see that both interest rates are in sync.  (Remember -interest rates are relative...when the cost for borrowing is high, so is the interest rate for saving)

Now let’s look at a chart covering 200 years courtesy of CNBC.  The big takeaway over 200 year is that interest rates have averaged 5.18%.  This is about the same tax-free return currently yielding on IBC designed Whole Life policies.

Now let’s look at the Moody’s Corporate Bond Yield history which aligns with historical rates on the previous with the previous charts.  Remember that life insurance companies invest up 90% of their portfolio in AAA rated corporate bonds so their dividend scales will reflect the greater corporate bond market. (I've included the links to take to each chart if they are too small to see.)

You can see bond yields falling since the 1980’s.  Yet despite falling interest rates over multiple decades, Whole Life policies have steadily performed paying the guaranteed interest and then dividends on top for additional growth.

From an illustration standpoint right now is actually the best time to buy a Whole Life policy from a historical standpoint because if you look at the policy guarantees as well as the non-guaranteed ledger (the non-guaranteed ledger includes future dividend assumptions based on the current scale), the policies are illustrated to perform very well despite interest rates being as historically low as they’ve ever been. 

Of course, the flipside is that if you bought a Whole Life policy in the 1980’s when dividends were at their highest, you’d be disappointed because you would have experienced a declining dividend scale since then.   However, you'd still have a whole life policy that is growing each year and earning dividends to help outpace inflation. 

Eventually though interest rates will normalize.  When that happens whole life policies purchased in the past 10 years will outperform their current illustrations printed at issue.  We just don’t know when interest rates will rise.  The Federal Reserve has basically made it impossible for interest rates to achieve real market rates and this market manipulation leads to another concern.

What happens if the Federal Reserve creates too much money out of thin air and accelerates the devaluation of the dollar beyond the Fed’s stated 2% annual inflation goal?

First, here’s some peace of mind.  Just like how whole life policy values have endured regardless of the prevailing interest rate environment, these policies have also survived every monetary change in the United States for the past 170+ years.  It’s worth noting that monetary systems change in some way about every 30 to 40 years. 

Most people don’t realize it when buying a whole life policy but the insurance companies they are buying a policy from have actually been in business long before the the Federal Reserve was created.  The Federal Reserve in its current form (INTERESTING FACT-it's actually the 3rd central bank of the United States since the Declaration of Independence in 1776) has only been around since 1913.  I highly recommend reading The Creature From Jekyll Island if you want the full history on bankers and politicians plotted to create a central bank at a time when banks were despised by the general public.  It's call the Federal Reserve for a good reason even though it's actually a private bank...

During the past 107 years the value of the dollar has shrunk by 94% since the Fed was created.  Whole Life policies have managed to perform through everything so far.

Coincidentally (or not), 1913 is the same year the IRS was created.  It is a bit convenient that politicians would give banks the legal ability create money out of thin air which in turn enables politicians the ability to call on the Fed to borrow money secured by a constant source of revenue (income taxes)... if you stop to think about it...

Here’s some of the monetary changes of the past change century and whole life policies have survived them all.

FDR confiscated gold and made it illegal in the 1930's, then we had Bretton Woods system in 1944 making the dollar the top global currency (governments could exchange dollars for gold) until Nixon officially made the US dollar fiat over night in August 1972 essentially bringing us to our current system which is fiat the world over.

The big question though is how would hyperinflation affect Whole Life policies?  That’s something Americans haven’t experienced but like the black swan event we are experiencing with the Coronavirus, anything is possible.

The first thing to know about hyperinflation is that it doesn’t happen overnight.  The most referenced examples of hyperinflation in the past century happened in Germany in the early 1920s, Zimbabwe in the late 2000’s, and this past decade in Venezuela.  In all cases, the devaluation happens gradually at first and then accelerates to the point where inflation reaches double digits on a monthly basis and then violently where inflation is 100%and beyond on a weekly basis.  We will be painfully aware of accelerating devaluation when it arrives. 

This is the plan with your Whole Life policies if hyperinflation happens to the US dollar:

  1. Take the maximum loan allowed to buy assets you feel would maintain value (gold, gold stocks, real estate, etc) then repay those loans with pennies on the dollar after the system resets, or
  2. Surrender the contract (whole life policies have no surrender penalties), use the cash value to buy assets you feel would maintain value (gold, gold stocks, real estate, etc.  Assuming you are still in good health and can qualify, re-purchase your whole life policies once the new monetary system is settled.

Pretty straightforward.  No need to panic when you know you can choose option A or B.  And that's if it ever happens here.

Moving beyond hyperinflation, we are experiencing inflation but nothing alarming.  I’d call our current inflation experience “the gradual phase” and historically the gradual phase is all we will ever experience because new monetary systems are introduced 30 to 40 years so that we never see the end result of the inflation game- that is people losing everything overnight.

Think of the Euro which came into existence in the late 1990’s.  Every country in western Europe had their own currency and then suddenly they didn’t.  But they didn’t lose all value over night.  Currencies were revalued to a central peg.  It’s no different than other times in history.

What’s next for the dollar?  Will it remain the top global currency?  I’m guessing it won’t.  The Roman Empire slowly crumbled over centuries until the barbarians destroyed it once and for all.  Nothing lasts forever.  Not even a Whole Life policy… joking here but Whole Life policies do endow at age 121 so they aren't engineered in perpetuity.

My prediction is that the dollar will be revalued by a global bank and made part of basket of currencies.   I can’t predict when and I think it’s a fruitless exercise anyway.

Remember, the dollar was originally pegged to gold.  It was actually a receipt for gold held in the bank, hence bank note and a note is an IOU.  Think about the mortgage note you signed to buy or refinance your house.  They call it a note for a reason.  It’s an IOU.  Now pull out a dollar from your wallet and look at the top.  What does it say?  Federal Reserve Note…  IOUs issued by a private bank (the Federal Reserve isn’t actually Federal and it has no reserves) backed by tax paying citizens…

As stated previously, FDR took away the gold standard domestically.  40 years later Nixon took away the gold standard internationally in the 1970s.  What I’m saying is that all this has happened before and it will happen again.  No American has lost everything over night due to a monetary change.  

We will be okay.  I’m very confident of that so it's important we continue to save money and plan for our futures.  Always mindful about inflation, central bank manipulations, but never burying all assets in the backyard.  There's no need for that extreme.  If you're concerned I like the idea of 5-10% in precious metals.  The rest should be earning interest and producing cash flow which your IBC designed whole life policies will help you accomplish.

Also, our IBC designed whole life policies will be okay, too.

To understand why is to know how the Paid Up Addition’s rider increases both the cash value and death benefit simultaneously.   This rider is what makes Infinite Banking designed whole life policies unique.

Instead of slowly accumulating cash value like traditional whole life policies, IBC policies build cash value from day one.  This rider also efficiently increases the permanent death benefit.  

The end result is that IBC whole life policies are able to keep up with inflation over time compared to other types of policies that have little to no cash values and death benefits that stay level.  The people who own those types of policies see them ravaged by inflation with each passing decade.  That won't be you when you implement Infinite Banking.

If you have more financial questions I can help answer, please let me know.  You can always find me here:

Thank you,

John Montoya