How Much, In Dollars, Do You Love Yourself (and Your Family)?

On Valentine’s Day we typically express our love for our significant other with a gift.  The idea of gifting the person you love with a life insurance policy is a bit morbid though.  Nonetheless, it does certainly say something about how much you value your relationship more than any other gift you can give.  One of the great advantages of life insurance is that it allows you to create an estate of substantial size before you’ve actually saved to create it.

But what if you’re single?  What if there is no need for you to replace your income or have your mortgage paid in the event of an untimely death?  Is there no need for life insurance?

I’ll argue you despite not having a person depending on you to carry on with the life you’ve built together, there is still need for life insurance and specifically a Whole Life policy which I’ll simply refer to as a Cash Value policy.  In fact, I’ll give you two reasons.

#1: Tax-Free Source of Funds During Your Working Years

There’s only two realistic places to park cash where it is allowed to grow tax-free:  Roth IRA and Cash Value policy. 

Roth IRA’s are great for retirement but there are too many restrictions to limit its utility during your pre-retirement years.  Limits to annual contributions and if your income is too high, then you can’t contribute at all.  There’s also the issue of access to your account balance being restricted to only your contributions, and if you would like to restore the withdrawal, you have only 60 days to do so.  

Cash Value policies do not limit you with regards to annual contributions (called premium) or limit access to available cash values for any reason. Higher income earners are not excluded. However, not everyone can have a Cash Value Life Insurance policy.  The reason being you must qualify for life insurance.  If you are in poor or marginal health, it’s possible to get declined.  

Ideally, you have both types of vehicles at your disposal.  If you’re thinking a Roth IRA is more important, here are some things to consider.  

Don’t discount your need to have a safe place to have available source of money always growing regardless of market conditions.  People keep a traditional checking account to pay bills but also to maintain an emergency savings account.  A traditional bank is crucial and a necessity for bill paying but not for emergencies when a Cash Value policy provides so much more value:

- better long-term growth

- no 1099’s to report interest

- ability to take policy loans against cash value balance without interrupting growth

- ability to repay the loans with any amount and with any frequency of your choosing

- additional death benefit 

- moral reasons: fractional reserve banking contributes to inflation whereas full reserve life insurance companies do not.  Society decays when money decays.  There is something to be said about not contributing to the problem by leaving only the minimum on deposit at traditional banks to pay monthly bills (plus 2-3 months cushion).  

90 days is plenty of time move money from a cash value policy to a bank account when funds can be delivered via Electronic Fund Transfer (EFT) from life insurance companies in 3-5 days.

Your ability to be safe and liquid without an over reliance on a traditional bank during (and after) your working years is as much of a necessity as saving for retirement with a Roth IRA.  After all, you have need to finance your lifestyle for ALL YEARS of your life.  If you fail to capitalize properly in the best place, traditional banks are all too happy to extend you money via credit cards at 18-25+%.  This is a debt trap best avoided.

Remember Mark Twain said: “A banker is a fellow who lends you his umbrella when the sun is shining, but wants it back the minute it begins to rain.”

Cash Value policies allow you to be your own banker instead!  Learn more by listening to the podcast I co-host: The Fifth Edition.

#2: Tax-Free Source of Funds During Your Non-Working Years

 

I’ll wager you’ve never considered Cash Value Life Insurance for retirement purposes.  It’s not part of conventional thinking when we’re conditioned to save for retirement via government controlled (qualified) vehicles like 401k/403b/457 and IRA accounts.  And consider that these qualified retirement accounts offer only one option for income:  withdrawals without any hedge for outliving your account balance (no lifetime guarantee options).

Nonetheless, there are numerous additional benefits and advantages to having a Cash Value policy in your overall financial portfolio:

- non-correlated asset

- guaranteed cash value increases each year

- ability to customize withdrawals or take policy loans for tax-free income

- ability to annuitize cash value for guaranteed lifetime income

- availability to have access to the death benefit as an additional source of funds due to terminal or chronic illness

- ability to combine with other assets like 401k/IRA’s to create additional retirement income strategies that produce more income than 401k/IRA’s will provide on their own: 

1. Covered Asset Strategy
2. Volatility Buffer Strategy

Summary

Single people: Look past the death benefit as a reason to own permanent life insurance.  Cash Value Life Insurance is an incredible gift you can give yourself that carry benefits and advantages which are too important to overlook.  I give you 2 reasons own a cash value policy: tax-free use and control of your money during working and non-working years, in one place no less.

The best time to start is always yesterday.  Remember, your health is never guaranteed and this is the one financial account that must be medically qualified for.  

Though Valentine’s Day comes around once a year, this is a gift you can give yourself any day of the year.  My advice is to get started sooner rather than later.  Your future self will appreciate you had the foresight to think both long-term and unconventionally.

Here’s the best way to connect with me:  www.IBC.guru

Thank you,

John Montoya

There is No Secret Ingredient

One of my favorite movies is Kung Fu Panda and the lesson about the secret ingredient applies to Whole Life.

When people learn about Infinite Banking, they feel like they discovered something that wonderfully new and magical.  The truth is though there is nothing magical about Infinite Banking or Whole Life policies other than the perceived newness of it.

There’s a mystical feeling about making a discovery, traveling some place new, and the a-ha moment with Infinite Banking and Whole Life is like that, too.  But there is no magic about it, no sleight of hand.  This is a good thing because if there was something magical or some sort of con involved to distract your attention, Whole Life insurance would be, well, Universal Life insurance.

Same thing with Infinite Banking.  It’s perhaps a novel idea at first until you realize banking has been around for thousands of years.  People who have saved will lend to those who need capital and the cost to the borrower is interest.  

If you’ve ever loaned a friend or family member money, you’ve banked at the individual level.  It’s that simple.  At a larger level, that’s the role traditional banks have filled for people who haven’t saved enough capital for what they want or need.  But the banking function of lending is not exclusive to banks.  We are just conditioned to think it is.

Enter Infinite Banking at the individual level.  The “you and me” level as Nelson Nash used to say.  He would also tell people the banking function doesn’t have to be done with Whole Life.  It can be accomplished with a Bank Line of Credit (Home, business, or personal).  It can be done with a checking/savings account.  However, his conclusion was Whole Life was the best financial vehicle to harness the banking function. Infinite Banking was born and his book Becoming Your Own Banker was written to help people understand a different way of solving for our greatest financial need:  financing.

To be clear, Infinite Banking and Whole Life are two separate things.  The former is a strategy, the latter is a financial product.  IBC requires a financial product.  Whole Life doesn’t require Infinite Banking.  

What Whole Life accomplishes through its guarantees and predictability is make it the best choice to practice the banking function in your own life.  Rather than relying on traditional banks for all the major capital you’ll require in your life, you can instead Become Your Own Banker.  

And Whole Life works so well because there is no magic to it.  Or as say, “no luck, skill, or guesswork.”

Premiums paid result in guaranteed cash value.  Only in a Whole Life policy does the cash value represent the equity you own in the death benefit.  Consider a 30 year fixed mortgage as an analogy:  level payments for all years where each mortgage payment results in an increasing equity position for the home owner.  Same thing for Whole Life where each premium results in a growing equity position of the death benefit until the cash value ultimately must equal the death benefit. This never happens with Universal Life policies.

I’ll explain Universal Life this way:  you lease the death benefit, you never own it.  

The reason why is because the cost of insurance in Universal policies in designed to increase every year and any additional amount paid above the cost of insurance is unbundled into an interest bearing account which is the cash value in a Universal policy.  Since the cash value floats based on whatever interest crediting option available in the product in Universal policies, performance requires “luck, skill, and guesswork”. The cash values must also stay above the increasing cost of insurance or the policy will begin to eat itself.  There is nothing certain about Universal policies unlike a Whole Life policy.  

To sum up, there’s nothing magical about Infinite Banking and Whole Life.  No secret ingredient.  Whole Life is based on guaranteed numbers (math).  As a result, its performance is guaranteed by the life insurance companies that offer it.  Infinite Banking is the idea and strategy eliminating the middle man banking institutions.