What's the Difference Between Guaranteed vs Non-Guaranteed Cash Values?

 

Guaranteed Vs. Non-Guaranteed:  Understanding Whole Life Values

I'm to going to discuss the difference between guaranteed vs non-guaranteed values within a Whole Life policy, why having a foundation of guarantees is arguably the most important detail in setting up a “family banking system”, and revisit what distinguishes a contract from an investment.

Guaranteed vs Non Guaranteed

Guaranteed Values:  this is the year by year performance guarantee in detail out to endowment (typically age 121).  It’s based on math and actuarial science.  Life insurance companies provide a blueprint based on worst case projections should a dividend never be paid during your lifetime.  Something to keep in mind:  All the life insurance companies we use for IBC have been around for at least 100 years, are A rated, and most importantly to me, they have never missed paying a dividend… ever!  So the guaranteed values reflect a scenario of no dividends for the life of the contract yet it’s a scenario that’s failed to material even for one year.  Let that sink in for a moment.

You essentially have a fool proof system that is guaranteed to increase in value without any luck, skill, or guesswork during your lifetime.  No other place for money exists with the same level of guarantees that what you want to have happen, will happen, even if you’re not around to see it.  The last part of course speaks to the tax-free death benefit bestowed on your beneficiaries when you graduate to the next level.

Non-guaranteed values:  Take the guaranteed values and now add non-guaranteed dividends from the surplus profit of a mutual based life insurance company.  That’s it.  Life insurance companies are highly profitable but legally they cannot guarantee the dividends they will pay out next year or, 5 years from now, or ever.  By law, they have to project future values based on the current dividend scale.  They can’t assume interest rates will increase in the future and project higher dividends.  So the non-guaranteed projections are IMO conservative estimates of future performance.

The most important detail in setting up a “family banking system”

For banking purposes, this is a one of a kind “turn-key”, ready made financial system that is created with the purchase of a Whole Life policy.  IBC practitioners who have been around will recall that Nelson Nash was fond of saying: “Every time a person buys a life insurance policy they are starting a business from scratch.”  That business of course is a private family banking business between you and the life insurance company at what Nelson would call the “you and me” level.  

Of course, you do have to read between the lines of the contract to fully grasp the idea of Infinite Banking.  This is where the majority of people who first stubble upon IBC get stuck in the weeds.  They see a life insurance policy and get stuck.

I once heard Nelson say that calling this financial system a Whole Life insurance policy is one of the worst things the life insurance industry has ever done.  Right from the start, the life insurance industry provided a label that continues to confuse the masses to this day.  The smallest minds see life insurance policy and that’s all it will ever will be.  

Those of you who take the time to read Nelson’s book “Becoming Your Own Banker”, listen to our 30+ episodes now all related to Infinite Banking, and speak to an Authorized IBC practitioner, will realize what Nelson said from the beginning.  The Infinite Banking Concept is an idea.  It is not about life insurance.  It’s about controlling the banking function at the you and me level to root out rent seeking traditional banking system that will have you believing their “lies, lies, lies”.  

And what is the biggest lie of all?

That you need Traditional banks to finance all the major capital expenditures in your lifetime.  Simply not true but this of course is not what we are taught.  12 years of government schooling, 100’s of higher education degrees, and none of it teaches you the history of money and the importance of banking?

Why?  It’s about control.  Control the flow of money, create debt, and traditional banks have a client for life.  It’s parasitic relationship that need not to exist.

To bring it back to Guaranteed Values, a whole life contract provides the legal framework for a financial entity that is guaranteed to increase in value every year of your life.  The contract also provides you with guaranteed access to the cash values.  You can never be turned away.  

Imagine the peace of mind knowing you have posited your labor into a system protected by contract law, is considered an asset available for your use with no questions asked, and it is only solely by you.  Nothing else in the financial world like it.  No 401k/IRA or asset class can replicate the guarantees of a Whole Life contract.

Contracts vs. Investments

We'll refer to this as "Contractual" Wealth vs “Statement” wealth.

Statement wealth is when a client gives their money to an institution or organization in the hopes that they can get their money to grow. In this arrangement, the giver of the money assumes all the risk for the growth of the money. The organization sends a statement 1-4 times per year, telling them how they are doing at that time. 

Contractual wealth is when a client gives money to someone else as part of a contract. The recipient of the money assumes the risk.

Reminders:

IBC working is NOT predicated on dividend performance and chasing rate of return like you would with an investment.  It is a financial system, period. 

In order for a financial system to work, there must be a framework for money to move through it.  That’s what we are establishing with IBC Whole Life policies.  These contracts provide a framework for a financial system that allows you to control the flow of your money back to you where it can grow uninterrupted and so that we may continue to use that money repeatedly in our lifetime to build generational wealth.  

Think of it this way:  Instead of building beautiful fountains for the traditional banks, we can build our own.

If you have questions and would like to schedule a consultation with an Authorized Infinite Banking Practitioner, please visit the calendar here: www.IBC.guru

Thank you,

John Montoya

5 Reasons Why Infinite Banking Makes More Sense Than You Realize

There's a reason our education system doesn't teach you about money.  There's a reason our education system doesn't teach how the banking system works.

Until you understand the reasons why, you are simply a pawn on the chessboard.  Limited in movement and the least important piece in the financial game we are living.

To help you grasp the bigger financial picture, you need to understand WHY Infinite Banking?

If you don't understand the reasons why, you're like a rudderless boat drifting whereever the current moves.  So here's 5 reasons to help you understand your financial WHY the Infinite Banking Concept (IBC) should be examined for your situation to determine how you can benefit:

1. IBC is a financial system that guarantees what you want to have happen, will happen, even if you're not around to see it happen.   An IBC Whole Life policy (designed with a Paid Up Addition's rider) comes with the strongest contractual guarantees that can be found anywhere.  Uncorrelated compounding asset growth materializes every year without any luck, skill, or guesswork (even when you leverage policy loans to buy more wealth producing assets!).   

Whole life policies are the only type of permanent cash value life insurance contracts that endows meaning the cash value will eventually equal the death benefit regardless of whether that happens next week or at age 121.  The financial success of a Whole Life plan is reverse-engineered to provide an annual blueprint of increasing value.  No other place for money does the same.   Think about it.

2. IBC is full reserve system.  Unlike a traditional banking fractional reserve system where your deposits are leveraged to make new money to lend at interest, the life insurance industry is afforded no such money printing luxury.  By law, all liabilities must be equaled by assets on the balance sheet of a life insurance company.  This is called solvency.  The life insurance industry has it and must maintain 100% solvency by law.  This means money held by a life insurance company is with the safest financial institution and industry in the world.  This alone is reason enough why banks place up to 25% of their reserves with life insurance companies in permanent cash value life insurance contracts called "Bank Owned Life Insurance."  No life insurance company would ever risk more than they possibly have to in a traditional bank account.  Think about it.

3.  You 100% control it.  A Whole Life policy is considered an asset because it appreciates in value every year and it is owned by the policyholder.  There is government or 3rd party custodian with overriding control of a Whole Life policy.  401k/IRA's are created by the government meaning you partner with an ever changing landscape of politicians in Congress who in most cases fail to represent your best financial interests.  A Whole Life policy in comparison is simple because it is a unilateral contract (grandfathered in place) between two like minded parties:  you the individual and a privately owned mutual-based life insurance company.  No rent seeking 3rd parties needed.  Think about it.

4.  It cannot be taken away from you.  Money in a banking system can be confiscated at any time.  While it is your money, you must follow the rules set by the banks.  Banks can censor any of your financial transactions and are required to report anything deemed suspicious no matter how inoccuous.  The IRS can put a lien on your bank accounts and restrict your access without warning.  

A properly designed and funded IBC Whole Life policy is a private contract existing outside the realm of bank and IRS reporting.  Considered private property, it cannot be seized from your grasp (unlike a house).  In short, you have to abide by bank rules and be on good terms with the IRS to have access to your own money.  Think about it.

5.  You can live life on your own terms.  Infinite Banking is a strategy that creates an alternative financial system that protects you, your family, and your labor (translated into money).  Whole Life policies have existed for nearly 200 years largely unchanged because the contract law that protects it as an asset along with the actuarial science that guarantees the financial performance have been proven to work since they were first created.  

Although Whole Life policies were not created to function as an alternative banking system, if one examines the banking function of a traditional bank (and the true reason why people bank... we all need access to large amounts of capital throughout our adult life) and compare it the banking function with a Whole Life policy, you will discover a far more robust system for money that not only puts individuals and families first, banking with Whole Life (the IBC strategy) also provides long-term benefits for the economy with less of government meddling or "aid" from your local and federal overseerers.  Ultimately, the Infinite Banking strategy is about regaining your freedom from a top down system that doesn't ever want to be fully in control of your own life.  Think about it.

Elevate your understanding of money and banking, you will elevate your financial status.  No need to be a financial pawn.

To learn more about Infinite Banking, schedule time in my calendar at www.IBC.guru.

Thank you,

John Montoya

Comparison: Whole Life Policies and Tenet

Whether you care or not for the movie Tenet directed Christopher Nolan, it is for certain a unique film.

(SPOILER ALERT)

If you’ve heard somewhere that the movie is about time travel, it’s not.  At least not in the sense of jumping to points in time in the future, past, or even sideways (thank you Lost).  

Nope, this story offers something different.  In a word: entropy.

Generations into the future a scientist has invented a machine capable of reversing the flow of time.  It’s this machine that the future of mankind and the world hangs in the balance and it’s up to the protagonist to stop a doomsday event from happening.

The strategy chosen to combat the antagonist is a called Temporal Pincer Movement.

Essentially, there is a (RED) team in the present moving forward and a (BLUE) team in the future working backward to and from, respectfully, the same point in time.  

This gives the distinct advantage of knowing what will happen and how to achieve the outcome desired.

What’s the popular saying?  

“Hindsight is 20-20”

A temporal pincer movement gives the advantage of hindsight which is what makes the strategy so compelling and a juggernaut to overcome.

If that sounds a bit confusing, watch the movie.  As a fan of Inception, another film by Christopher Nolan, Tenet ranks up there with movies that are meant to be enjoyed multiple times.  

Here’s where Tenet is similar to a Whole Life insurance policy.

A Whole Life insurance policy is the ONLY financial product that gives you the hindsight of 20-20.  It works moving forward and backward at the same time.

I call this a “Financial Temporal Pincer Movement”.

Quite literally, the cash value in a Whole Life policy is INCREASING every year at the same time that guaranteed death benefit has been solved for at age 121, the last official day of the policy contract.  Once the policy is issued, the death benefit at the future age of 121 starts to unwind, or work backwards (entropy) to the original face amount from the policy issue date, or day 1 of the policy.  

Each year in a Whole Life policy is a reference point when looking at your own illustration.  The cash value each year gives the present value of the future death death benefit.  

The unknown variable is the year of your eventual passing.  The end of your life is the point the cash value then blossoms in value to equal the death benefit.  If you live all the way to age 121, the cash value has now become equal to the death benefit on the final day of the contract.  We call this Endowment.  

Essentially, what you desire to happen financially is set in a blueprint (fate, if you will) and the outcome is certain.  No other financial vehicle offers this.

What advantages would you have if you knew your financial fate 10, 25, or even 50+ years into the future?

How much of peace of mind would you have knowing that everything you wanted to accomplish (nest egg for retirement, guaranteed income options, a proverbial tax-free mountain of cash to use for any purpose) will be available to you no matter how the stock or real estate markets perform?

Do you have questions about Whole Life policies and Infinite Banking? Schedule time here.

Cheers,

John Montoya

Note, you may want to put on captions because there were points in the movie where you will attempt to read lips and rather than guess at what’s said and ruin the flow of the movie, captions will eliminate the need to wonder what was mumbled.  

IBC Q&A Mailbag: The Power of Zero (Review)

The following is an email exchange with an existing client:

Hi John,

I have read the Power of Zero book by Dave McKnight, along with listening to many of his podcasts. I seem to resonate with his approach to matters. Have you read, and are you a fan of his approach to things also?

 

Thanks. 

My reply:

I am familiar the book and movie.  The director, Doug Orchard, actually produced and directed two of the videos on my website.   

(The 2 videos are at top of the page here: https://jlmwealthstrategies.com/videos/)

 

I like the Power of Zero strategy with regards to how it applies to indexed annuities.  I do have a difference of opinion as it applies to IUL’s because of the increasing cost of insurance within those policies.  I don’t believe the industry does a very good job of disclosing the risks with IUL’s.  The only mention of risk to a prospective buyer seems to be that money can’t be lost if the market goes down.  This is a half-truth at best.

 

There are actual risk esposures IUL's have but they are usually never mentioned.  The cost of insurance in an IUL increases every year by a larger amount which poses a major problem during retirement years.  IUL are sold on the idea that the returns will be there, and while it is possible they could be, but it’s also possible they won’t. Then what?

 

For this reason, I would only recommend an IUL for two sets of people:

1) High net worth clients who can commit a minimum $20k a year while still maintaining diversified portfolio of other assets AND life insurance policies. 

2) Parents living with diabetes who cannot otherwise qualify for a permanent cash value policy.  There is an IUL only program specifically designed for those with diabetes, currently unavailable with Whole Life.

Outside of these two demographics of people, I wouldn't recommend an IUL because I see too many buyers of IUL putting the majority of resources into one IUL plan and little elsewhere.  It’s a recipe for disaster because here's what I know as an experienced advisor what go wrong with an IUL:

Here are 5 Perils of an IUL

 

1.  The IUL cost of insurance is based on annual increasing one year renewable term.  Cheap when young, cost prohibitive once a person hits retirement.

2.  Returns could be below illustrated.  The increasing cost of insurance will only erode returns further. 

3.  Planned premium funding falls off because life happens.  Examples include layoffs, an extra kid (or two!), unplanned college expenses, failing health, divorce, lack of financial discipline... even pandemics!  Life does happen and failing to maximize the policy contributions of an IUL has an adverse effect on the returns of the policy because less premium means less cash value potentially earning interest to offset internal increasing costs of the life insurance.  

4.  IUL’s never endow.  

Only Whole Life policies can endow---- this means the cash value is guaranteed to equal the death benefit by age 121.  The current cash value in a Whole Life policy is actually the present value of the future death benefit.  This is hard to grasp at first but it’s very powerful.  

Essentially, a Whole Life policy is reverse-engineered from age 121 with fixed premiums and a minimum guaranteed growth rate completely uncorrelated to the market or economy.  What this means is that what you want to happen, will happen. A Whole Life policy provides a blueprint guaranteeing policy owners that their policies will eventually grow to equal the death benefit—even if their not around to see it.  

Furthermore, the PUA rider in an Infinite Banking designed Whole Life policies speed up the process by turbo-charging the cash values AND death benefit at no future cost.   In comparison, IUL is a side savings account based on positive market returns combined with the rising cost of a one year term policy.  While it’s nice IUL’s have the potential for 1-2% higher average returns than Whole Life, returns are dragged down by the rising cost of insurance over time, the unpredictability nature of market returns, and lack of discipline to stick to the planned premium when life events invariably happen.)

Underfunded and/or poor performing IUL policies should not be the foundational basis of a financial plan because IUL's have no guarantee of performance.  Just a guarantee of zero AND a guarantee of increasing life insurance costs.  As you can guess, I like building a financial plan with growth guaranteed each year and guaranteed fixed premiums that combined create financial certainties... hence Infinite Banking designed Whole Life.

5.  Taking income from an IUL during years of low and no return makes the cash value disappear even faster, especially so when the cost of insurance is rising exponentially after age 65.  It's the triple whammy that can't be avoided: no return, loans coming out, exponentially rising cost of insurance.  (This perfect storm of risk is even more pronounced in Variable Universal Life (VUL) policies).  

For this reason, I mention an IUL is not suituable for middle class income earners because they won't have a fallback plan if the majority of their eggs are in this one basket.  There’s just too many perils for middle class clientele to navigate to make it their main strategy.   

Unfortunately, there is an army of inexperienced life agents and advisors touting an IUL as the best thing since slice bread, and worse yet, people show me their IUL plans that have been designed the wrong way because there is too much death benefit (which means higher commissions for the advisor and an increased likelihood of that IUL to fall short of expectations).

 

All this said, The Power of Zero with Indexed Annuities is an excellent way to go because there is no life insurance mortality costs to eat away at the returns and many indexed annuities can be purchased with no annual fees or if choosing an indexed annuity for income purposes, a guaranteed lifetime income rider that averages 1% per year which is an extremely low cost for the peace of mind knowing you'll always have an income.

 

My thoughts are if people really want "The Power of Zero" without any true downside risk (no market risk AND no rising mortality costs), then combine IBC designed Whole Life policies with uncapped Indexed Annuities.  You get the best of both worlds (upside growth and the IBC banking strategy) without taking any unnecessary risk.

And one more thing, remember that if you're doing Infinite Banking right, you will have more than one IBC designed Whole Life policy. 

We can discuss further if you like by scheduling time on my calendar here:

www.IBC.guru

 

Thank you,

 

John Montoya

3 Things To Consider When You Delay Getting Started With IBC

 

It's possible you’ve been looking into Infinite Banking for a few months or even a few years now and perhaps you've yet to get started.  Sometimes the hardest thing is taking a leap of faith when doing something for the first time.  A few things to go consider:

 

1. We don’t get any younger and our current health is never guaranteed.
2. This is a guaranteed contract.  It’ll grow every year without any luck, skill, or guess work… and it gives you tax-free access to cash values via policy loans for any reason without interrupting the growth.
3. If you have a family to protect, there is no better option for your “safe money”.

 

Check out my podcast if you’d like to continue to learn at your pace:  www.TheFifthEdition.com

 

Calendar:  I’ll be here when you are ready.  

Just keep in mind point #1 above and remember this:  

Time is the one thing we don't get back.  

Until this is taken care of, there are no guarantees except, of course, death and taxes. 

 

Cheers,

 

John

 

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

First...

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)

Second...

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:  www.IBC.guru. 

Thank you,


John A. Montoya

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: www.IBC.guru.

Thank you,

John

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 1^st 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:  www.IBC.guru.

Thank you,

John Montoya

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:  www.IBC.guru

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:  https://jlmwealthstrategies.com/recommended-books/

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,

John

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:  www.IBC.guru.

Cheers,

John Montoya