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

Thursday, April 9, 2020

IBC Mailbag: traditional advice, policy loans, hyperinflation

I get a lot of questions about Infinite Banking.  For this post I'm sharing a recent email I responded to from a potential client.  Names have been removed.

Hi ----,

Thank you for your questions.  Definitely a lot of craziness going on.  The life insurance industry is not immune either.  Some age groups are being excluded (over 70) temporarily, scheduling exams is a very tall order, and doctors offices seem to be overwhelmed so getting medical records to underwriters is super slow. 

It doesn’t surprise me your traditional financial advisor is skeptical.  

They’ve been trained and conditioned to think, recommend, and implement Wall Street based portfolio plans.  Life insurance is mostly an afterthought to traditional advisors because they operate on a Wall Street revenue model.

Sadly, Infinite Banking is unknown to the majority of life agents because the life insurance industry doesn't teach this strategy.   Life insurance industry trains agents to sell policies for maximum death benefit protection.  So it’s the proverbial “can’t see the forest thru the trees” for traditional Wall Street advisors and life only agents which is why working with an authorized IBC advisor is the best way to learn and implement the strategy.  Authorized being the key word there.  (The Nelson Nash Institute is where you can go to confirm your advisors status.)

Infinite Banking isn’t even about the death benefit.  It’s not even about having a Whole Life policy.  The Whole Life policy is just the best vehicle for the strategy.  If it wasn’t we’d be using and recommending bank line of credits, mutual funds, and 401ks/IRAs instead.  But none of those options give us control over our money safely and efficiently (…and even tax-free) all in one place.  IBC is about freedom over our money—taking control back from banks and Wall Street.  Traditional advisors (Banks/Wall Street) want that control outsourced to them so IBC is naturally a paradigm shift from mainstream financial planning. Traditional advisors also don’t practice IBC so seeking advice from them is like going to a foot doctor for a chest pain.

I’d be happy to show you options for retirement income using the strategy.  We can do a virtual appointment and I’ll record it so you can share with your wife.  Schedule here:

Regarding loans, there’s more to it than the loan rate...

Loans are simple interest and calculated at the end of your policy year.  Currently, most carriers loan rates are 5% which is fixed for 1 year at a time.  Historically, policy loan rates have been between 5-7% because the borrowing rate is based upon a cost of money index used for the largest AAA rated companies in the world.  Essentially, policyowners get to borrow at rates available to blue chip corporations.  The 5% rate hasn’t budged in 13 years and when they have adjusted up or down, it’s a slow movement.  Life insurance companies tie the borrowing rate to this type of corporate money index because it also happens to be where 90% of their investment portfolio resides. 

So when I request a loan from my policy, they are more or less approximating the same interest return on their investments as they will now eventually receive on the policy loan I take.  Also, keep in mind all the policy loan interest is revenue for the life insurance company.  Since these companies are mutual based (owned by policyowners), this revenue from policy loan interest ends up as part of the surplus profit of the life insurance company and what happens to surplus profit?  It gets returned to policyowners (you and me, not shareholders on Wall Street like with stock based life insurance companies) as a dividend compounding our cash value and death benefit further.

FYI, there are policies that offer a fixed rate policy loan but fixed rates are generally 7.5 to 8%.  My oldest IBC policies are fixed at 7.45%.  I rarely use the cash values in these policies because my other policies are at 5%.  My family (me, my wife and 3 kids) have a total of 11 policies so we have a pretty substantial pool of money that’s always growing and under our control with access at various rates.  I tell people if they are really practicing IBC properly, they will have more than 1 IBC designed Whole Life policy and when that happens you can diversify with policies that have slightly different options depending on what you’d like, including different borrowing rate options.

Another key aspect with policy loans is that because interest isn’t calculated until the end of the policy year, each loan repayment I make goes towards reducing the loan balance dollar for dollar i.e. 100% volume interest.   Super consumer friendly.

This doesn’t happen with a bank loan.   Banks collect a portion of interest from your payment first, then the difference is applied to the outstanding balance.  This effectively delays debt repayment… and don’t forget, all banks are also charging compounding interest while they delay the debt repayment.  Think of a mortgage payment.  How much of a mortgage payment is interest first?  The majority of it.  Car loans, credit cards… same story.  Not with a life insurance policy loan.  Every cent of the loan re-payment directly reduces the policy loan balance.  Policyowners come first.

So nominally you might be charged 5% but your effective interest is lower because you reduce the loan balance dollar for dollar.  Your effective loan rate (percentage of %)is actually lower 

You also determine the loan repayment schedule.   You are the banker.  

Meanwhile the underlying asset (the cash values and eventually the death benefit) securing each policy loan are compounding in value while the money is used elsewhere for any purpose:  pay down debt, invest in other assets, pay taxes, or even for retirement.  😊 

Nothing like it anywhere else. 

With regards to your concern about hyperinflation

Please see visit the Recommended Books page on my website:

There you will find the book How Privatized Banking Really Works by Robert Murphy, PhD and Carlos Lara.  It's free to download.  Just click on the image.  On page 340 of the book, they will answer your question about what to do with IBC whole life policies in event of hyperinflation.  The entire book is phenomenal.  You have to get to the end of the book to get to their take on IBC but it’s well worth it.  I have this book available on my website for free to download but I’m including it here in this email.  The arguments are all laid out.  There are other great books on my website with links to purchase, too.  The Pirates of Manhattan is another great book that comes to mind which was thoroughly enlightening, too.  The amount of documentation supporting that book in particular against banks and Wall Street is overwhelming and cannot be refuted.

Hope this email helps answer questions you have about IBC.  Let’s keep in the conversation going.  The more you know, the easier it is to make decisions you and your family can benefit from.

Thank you,


Monday, April 6, 2020

Breaking Bad: One Decision That Could Have Saved Walter White from Becoming Heisenberg

So this coronavirus has given us all a chance to spend more time with our immediate family and, of course, binge even harder on our favorite TV shows.

I know I couldn't resist the opportunity to re-visit the downfall of Walter White and Jesse Pinkman on one of my all-time favorite shows: Breaking Bad.  I just finished watching the last episode of season 2 last night.  This show is about as perfect as a TV show can get.

There's just one thing that bothers me though.  Walter White never would have had to go all "Breaking Bad" into his alter ego Heisenberg if he had just done one simple and easy thing.

If you've watched the show, you know Walt is absolutely brilliant but his immense intellect and talents are relegated to teaching high school chemistry while all his peers have gone on to makes millions and/or earn industry accolades.  At one point, near the end of the show's run, his brother-in-law Hank calls Walt the dumbest, smartest person he's ever met.  That pretty much nails it for me, too.

You see, Walt had a choice up until he was diagnosed with lung cancer that could have altered his legacy for the good.  This one choice would have saved so many lives and heartache.  It wasn't just Walt's family that suffered from Walt's decision to build a meth empire.  There's Jane, Jesse's girlfriend, who choked on her own vomit as Walt watched her die and did nothing, the 167 passengers on flight 737 who also would still be alive, and this is just from the most recent episode I watched.  Talk about collateral damage.  The list of casualties can and does go on and on.

All of this happened for one reason.

Walt had one goal when he learned that he had advanced stage lung cancer.  He wanted to make enough money somehow so that his family would be taken care of after he was gone.  Financial security would be his legacy and gift to his family.

And he could have done it simply and legally.

Can you guess where I'm going with this?

This makes me think I need to get in touch with every teacher out to ask one specific question:

Do you have enough life insurance??? 

Seriously, that's all it would have taken for Walt to be at peace with his legacy and to save countless lives he irrevocably harmed.  

Of course, there would be no Breaking Bad to binge watch and enjoy.  Heck, the show would have been as boring as... the life insurance policy Walt would have owned on his life.

And if Walt had been overfunding a cash value life insurance policy like the Infinite Banking designed Whole Life plans I recommend for my clients, he could have had access to his cash values to pay for the best doctors and treatment without resorting to running behind his wife's back to cook meth in the desert with Jesse.

Most policies these days even have Accelerated Benefit Riders that give access to the death benefit while still alive.

The point I'm making is this, Walter White was definitely smarter than the average joe but when it came to protecting his family and leaving a legacy, he was as dumb as it gets.   

Please do yourself and your family a huge favor.

Lock in your insurability while you are still young and healthy with at least a convertible term policy.  This way you'll never have to... break bad.

If you need help determining how much life insurance you should own, contact me here:


John Montoya

Sunday, April 5, 2020

3 Rules To Becoming Financially Independent

If you have read Rich Dad Poor Dad by Robert Kiyosaki, he describes 3 basic financial principles to building wealth.  These rules are so simple to follow and understand that anyone can do them.

Here they are:

  1. Pay yourself first
  2. Know the difference between assets and liabilities
  3. It’s not what you earn, it's what you keep.

These 3 principles apply to life insurance if you have the right type.  

Regarding term insurance, it’s touted by “experts” as the least expensive life insurance option.  This is only true on day 1.  Every day after day 1, the true cost of term rises from there because you have ongoing premiums and according to studies, 99% of term buyers out live the term period.  You are effectively putting more money into a neverending hole never to see again.  

After the fixed term period, in order to maintain the coverage of the policy, the premium rises annually and exponentially.  You've undoubtably seen this if you've reached the end of your term policy (or will when you do!).  Term becomes more cost prohibitive every year and this is the main reason why people end up letting the term policy lapse. 

Problem is the majority of people buy term policies and don’t realize they are buying a liability (they pay premium only to end up with nothing to show for it).  With Infinite Banking designed whole life policies, all 3 principles of Rich Dad Poor Dad are adhered to. 

Wealthy people buy assets!

IBC Whole Life is a forced savings with flexible premium riders that create high early cash values, it’s a growing asset with no market correlation so it grows by a larger amount every year, and the cash values are tax-free every day whether you use it or not (no 10% penalties either like with a 401k/IRA if you are younger than 59.5).  

By the way, with Whole Life policies the premiums are contractually guaranteed to never increase on you.  Not so with term policies as discussed above.

Nothing wrong with term policies if you are on a strict budget and need protection with you family.  By all means, get the coverage!  

That said, if you are buying a term policy and plan to convert to Whole Life later, my recommendation is to be sure:

  1.  you are buying a term policy from a mutual based life insurance conpany (owned by policy holders not shareholders) 
  2. and the term policy is convertible to Whole Life and ideally, an IBC designed Whole Life policy.  Not all mutual companies have IBC friendly Whole Life products.  For example, State Farm is a mutual company but they don't have an IBC friendly Whole Life policy.

I own multiple Whole Life policies on my life and I also have a 10 year convertible term policy with $2 million in death benefit waiting for when I'm ready to start my next IBC designed Whole Life policy.  I refer to this strategy as "IBC Future Planning".  I'll wrote a future post about it so stay tuned.

If you have questions about getting started with Infinite Banking and would like to learn more, please contact me here:

Thank you,

John Montoya