Tuesday, April 12, 2016

Infinite Banking Concept: The Ultimate Rainy Day Fund



The Ultimate Rainy Day Fund



Most Americans tend to keep a savings account or what we refer to as an “Emergency” or “Rainy Day” Fund and if you are like the typical American, chances are you keep that savings at your local bank.  For any financial plan, it’s the bare essential so we don’t really give it much thought.

But WHAT IF this little to zero "growth" savings account is creating a cash drag on your overall portfolio?  

WHAT IF the opportunity cost of letting money sit idle while it waits to be used is costing you thousands in unpaid interest during your lifetime?  

Depending on the size of your emergency savings account, the opportunity cost could reach into the tens of thousands or more over your lifetime, possibly into the hundreds of thousands of opportunity cost if you are in your 20's and 30's!

While it’s a solid strategy to have backup funds parked at your local bank in case your car breaks down, the plumbing in your house goes berserk, or unexpected dental bill comes due, you should be thinking long-term and seeking to optimize this ignored asset for every extra dollar you can safely squeeze out of it.

Banks don't park their reserves in CD's or Mutual Funds!  Why should you?


Did you know all the major banks turn to life insurance companies for safe, liquid, and tax-deferred growth on permanent life insurance policies that can be structured to accumulate cash value from day one?

Chances are you probably aren't aware that similar type of cash value life insurance contracts that banks utilize are also available to individuals as well.  Oddly enough, in the day of the internet and information everywhere at your fingertips, the best kept secret in financial planning is hiding in plain site!

Over the life of these contracts, the growth can be substantially greater than what your local bank will pay in interest.  Considering that banks are paying close to 0%, earning a tax-deferred and potentially tax-free 4-5% seems like finding a pot of gold at the end of the rainbow!

So if this is so, why don’t most people think about life insurance policies for their emergency “rainy day” funds?  Quite simply, the average person has no idea that life insurance can also be an additional source of long-term savings.  

The typical advisor and financial guru (Dave Ramsey and Suze Orman) recommend you buy term insurance only which has no cash value benefit.  While term policies do provide valuable temporary coverage, it’s easy to overlook all the major benefits of permanent cash value life insurance when set up utilizing The Infinite Banking Concept pioneered by Nelson Nash.

Here are a couple keys if you are looking to maximize your safe money account.

First, the type of cash value life insurance policy being referred to here is not your parents or grandparents life insurance policy that was bought for the maximization of death benefit at the lowest possible cost.  That's the old fashion way of buying life insurance and although it's called LIFE insurance but it's all about the DEATH benefit.  That's not primary goal of the Infinite Banking strategy I'm writing about here..

I refer to this updated life insurance savings strategy as a the Infinite Banking Concept but you might also learn about this strategy by the name Bank On Yourself (Disclosure: I'm an authorized practitioner for both organizations). A few popular financial newsletters have even started endorsing the strategy in the past 3 years. Most notably the Palm Beach Newsletter has been referring to it as the 770 Account or 702j Account.  

Regardless of the name, the strategy is the same and the structure of it is simple.  Instead of a maximum death benefit/minimum premium policy design for our clients, we structure a Minimum Death Benefit/Maximum Cash Value policy to turbo-charge the internal cash values of the contract immediately.

Second, in order to turbo-charge the cash value buildup within this policy, you must have the inclusion of “Paid Up Additions Rider”, or PUA rider for short.  For an advisor, this rider can reduce the commission on the policy by 60-80%.  But for the client, it means the cash value will be 60-80% greater because the money that would otherwise pay a commission is now sitting available as cash value for you.  Imagine that... a financial strategy engineered to put your interest ahead of the advisor. 

If you’ve never heard of this type of strategy, don’t be surprised.  It’s probably one of the best financial secrets there is and what’s really interesting is that banks park up to 25% of their Tier 1 assets into similar life insurance policies called Bank-Owned Life Insurance policies, or BOLI. 

Since banks are putting their safe money Cash Value Life Insurance contracts, I think it’s time you consider it for your Rainy Day fund, too.

To ask me questions or schedule a complimentary 20 Minute Telephone Appointment, please visit my online calendar here.

Thank you,

John Montoya



Monday, March 28, 2016

Lafayette Life's Letter To Convert Your Term Coverage





The letter Lafayette Life sends out each year regarding the term coverage is well intentioned but premature for the majority of Infinite Banking/Bank On Yourself policies.  The reason being that the term rider was specifically placed in these policies so you, Mr. and Mrs. Policyowner, could overfund the Paid Up Additions Rider.  If you were to prematurely convert the term rider before the end of year 7, your policy would become a Modified Endowment Contract (lose the tax benefits).  We don’t want that to happen. 

Lafayette will send that letter out to everyone with a term policy or term rider.  It’s a good reminder once you begin year 8 and beyond but definitely premature notice until then.  IF you have any questions about this matter, please do not hesitate to contact me:  www.vcita.com/v/john.montoya.

Best,

John Montoya

Thursday, February 11, 2016

Time To See The Bigger Picture


It’s been a phenomenal run since 2009 if you’ve had money in your 401k or brokerage accounts tracking the overall stock market.  That is unless you’ve been sleeping for the past month while global stock markets have been falling fast to start the year.

Could you have prevented this market loss in your portfolio?  Chances are you could have if you did a couple of things.  For starters, I usually recommend turning off the news and skipping the newspaper, unless you’re just reading the local news or sports section.  Everything else is usually political or economic drivel slanted towards one viewpoint or the other and in this writer’s opinion should be considered only for entertainment value.  If you’re internet savvy, there are better “alternative” sources of information where you can get a more informed read on what’s going on in the world.

Beyond becoming better informed about the state of the economy than what the mainstream press and government statistics can tell you (next to nothing truth be told, unless you actually believe the unemployment rate is really 4.9% as reported, and the housing market will continue to rise indefinitely… it won’t).

Point #1: You can and probably should look beyond mainstream news outlets for what’s really going on the economy.  You know the saying: “insanity is doing the same and expecting different results”.  The media is there to pacify you and a strong federal government most likely isn’t interested in having a well-informed populace.  There would be too many questions to answer.  Think about it.  Sadly, you’re financial advisor likely watches the daily news and reads Kiplinger’s or Money Magazine for the next great investments so good luck getting a different opinion there.

Here’s another popular saying and one of my personal favorites because I come across it quite a bit: “Can’t see the forest for the trees”.  This applies to you if your portfolio is all stocks and bonds/mutual funds.  For example, your 401k or 403b.  It’s difficult to impossible to prevent market losses if your money is tied solely to the ups and downs of the market.  Even bond portfolios lose money!  

Point #2: The only way to avoid market losses is to be… wait for it… completely out of the market.
This means you need to own assets outside of the Wall Street paradigm.

That may seem like a difficult task because frankly there are limited options to invest beyond the conventional financial products and solutions usually touted as the best way to accumulate a nest egg by all the big talking heads and Wall Street financial firms.

Fortunately, however, alternative strategies do exist and they are becoming more popular than ever largely because they provide a few things the traditional Wall Street portfolio lack:  safety of principal and guaranteed lifetime income.  

For a truly diversified portfolio, I would encourage you to think about working with financial institutions that have a vested interest in your future.  Remember Wall Street is just one way to accumulate wealth.  It can be a very good to you when the market is rising.  After all, a rising tide lifts all boats.  

But I think it’s safe to say the tide is headed out and there’s no point in being the one who is caught swimming naked.  

If you haven’t sat down with an advisor who specializes in strategies that can protect your assets, it’s time to consider looking at life insurance related solutions. 

Anthony Robbins recently published Money: Master The Game and in his book he interviewed the world’s greatest investors.  It’s an incredibly powerful and insightful book.  I encourage everyone to pick up a copy to learn everything Mr. Robbins learned during his research but here are two of the ground breaking conclusions Mr. Robbins shared in his best-selling book that I’d like to share with you:

  1.  “Private Placement Life Insurance” is a must have for every portfolio.  For those unfamiliar with Private Placement Life Insurance, this strategy is more commonly called the Infinite Banking Concept ® or Bank On Yourself ®.  Speak to an advisor certified to offer these solutions. 
  2. To paraphrase one of the highly accomplished investors Mr. Robbins interviewed: “The only outcome that matters is INCOME”, and in this particular chapter Mr. Robbins writes about how to create your very own private pension by utilizing Indexed Annuities. 

There you have it from one of the most influential and highly networked individuals alive.  If you only have a Wall Street portfolio, you should speak to an advisor who can help you see the entire financial landscape, including life insurance related solutions, so you start protecting your assets from loss and taxes while also building a future guaranteed income stream you can’t outlive.

Anything less that and you know the saying: “Can’t see the forest for the trees!”

John Montoya co-authored The Secret To Lifestyle Financial Security in 2013 with best-selling author Pamela Yellen.  To contact John, please visit www.vcita.com/v/john.montoya

Saturday, January 2, 2016

The Big Short - Must See Movie

I suppose it should go without saying that if The Big Short starring Steve Carell and Ryan Gosling amongst others is a must see movie, the book should be must read material as well.  The 2010 best selling book written by Bay Area author Michael Lewis follows up where his book Liar's Poker seems to leave off... focusing on the little understood mortgage backed securities market and telling the story we should know by now:  how Wall Street scammed investors and left taxpayers footing the bill.

I loved the honesty of this movie and quite frankly, I'm surprised by it.  I'm surprised a movie studio actually made a mainstream movie with some of Hollywood's brightest stars (hello to Brad Pitt as well) that exposes just how fraudulent the entire financial system is and although the movie is played for some laughs, the director does a poignant job of showing the dark side of the scam: 9 million jobs lost, 6 million removed from their homes, etc.

Among the many highlights is the understated Vegas pool scene where a SEC employee is chasing after a job on Wall Street and later is seen kissing a Wall Street yuppie goodbye outside the hotel the following morning.  Clearly, it's a nod to the SEC literally getting in bed with Wall Street.

Another favorite scene involves a Selena Gomez cameo where she's talking to the audience (you and me) and explaining synthetic CDO's while playing and using black jack as the metaphor.  It's all simply explained to make you furious if it weren't so well told and humorous at the same time.  (By the way, nice nod to the Golden State Warriors with the guy in this scene wearing Klay Thompson's #11 Slate Jersey which debuted only last season... oops.)

The scariest thing about this movie is that it tells the ugly, naked truth about Wall Street and the financial system that we all rely on.  Basically, our system as we know it is so fundamentally flawed and fraudulent that the masses don't know any different, and perhaps worse, they have no idea what to do about it.

Ultimately, the financial meltdown takes place in 2007 and the movie closes with this: what happened then should be a wake up call to everyone right now.  The system wasn't fixed and no one was held accountable.  In fact, the problems that created the problems are even worse now than they were before.

And this time it's not just mortgage back securities and propped up stock and housing markets that have me worried. Since the last financial crisis, the global economy has added another 50 trillion dollars to our colossal pile of debt. Add the fact that that all the too big too fail banks have grown even larger and, scarier thought, each of them have trillions of dollars in derivatives that are hanging out there like a nuclear financial bomb capable of wiping out everyone's bank account and portfolio.  That means this fragile economy and its celebrated phony recovery is far more vulnerable to a crisis than we were the last time around. And what's being done about it?

Nothing...

So it got me thinking:  How can one bet against the entire financial system?  And then the answer came to me... keep doing what I do and recommend to my clients.  Continue to buy and own physical gold and silver and keep cash parked with financial institutions that are legally required to maintain 100% reserves: life insurance companies via dividend paying Whole Life insurance contracts (via the Infinite Banking or 770/702 Account strategy-- all the same strategy, just different marketing).

And where possible, absolutely stay out of debt.  Don't go buying houses in markets that are clearly being propped up by malinvestment.  Buy other real assets that can generate profits even in a deep recession, like businesses with a solid track record.

Doing these things is the safest bet you can make and you'll sleep well at night.  You won't get stupid rich over night like those that bet against the housing market in The Big Short, but you also won't be like the rest of the masses who lose their life savings because they failed to see what should be so obvious if you watch this movie.

Do yourself a favor and go see it.  Then do something about your financial future.  Go to www.CashValueBanking.com, watch the videos and schedule an introductory telephone appointment by clicking here.

Happy New Year!