What Can I Do With Infinite Banking

What is the Infinite Banking Concept? Part 8: What Can I DO With Infinite Banking?

Have you heard about Nelson Nash Infinite Banking, and Becoming Your Own Banker and you want to learn more? Or maybe you’re already using the Infinite Banking concept, but would like to explain it better to your spouse, your parents, your children, your business partner, or friends.

Today, we’re unpacking the fundamentals of the Infinite Banking Concept and the way it benefits you NOW and LATER. In this episode, you’ll learn some of the options you have by creating an Infinite Banking policy… tune in now!

What is the danger of considering only immediate cash value and ignoring the future death benefit, dividends, and cash value?

Infinite banking concept life insurance policies are great for warehousing wealth, but it’s important to find a balance between early cash value, long-term potential, and death benefit. While early cash value is going to be of use in the short term, the death benefit is the backbone of the insurance policy. It acts as income protection for your family and helps you build a generational legacy if you’re playing the long game.

What is the Danger of Considering Only Immediate Cash Value and Ignoring the Future Death Benefit, Dividends, and Cash Value?

Working with an experienced IBC (Infinite Banking Concept) practitioner to not just create good liquidity in the early cash value, but also balance that with the long-term benefits for the most efficient policy possible is wise. This may even mean filling in your insurance “gaps” with term insurance (usually convertible) to reach your full Human Life Value. That way, you always have the right protection in place. 

It’s sometimes difficult to think about what you’re going to value thirty years or more in the future, but the more you can anticipate those desires now, the better position you put yourself in for the future. You may not care about having your full Human Life Value in your early 20s, but what about when your family grows? 

[8:47] “You have to step back and look at your own life and see the balance not only now as a younger person or a middle-aged person or an old person.”

[12:52] “The people who make the best decisions are the ones who can delay gratification, who can say no, I’m not going to eat the one marshmallow today because I get two tomorrow.”

What Kinds of Large Ticket Expenses Can I Use Infinite Banking For?

The benefit of an infinite banking policy is that you have the freedom to use your cash value on anything you wish. So the simple answer is anything. However, we often recommend using your cash value to finance things you wouldn’t normally use your checking account for. A car, a major vacation, an investment, or some other “big ticket” purchase is more suited to a loan. 

There’s no cut-and-dry answer because it’s going to depend entirely on your personal situation. For example, if you can make a big-ticket purchase in cash, but doing so would prevent you from paying your PUAs, you might be better off borrowing against your policy. That way, you can continue to fund your PUAs at a maximum. 

The reason is that paying those PUAs will buy you additional death benefit, and therefore increase your available cash value. This creates velocity in your policy and makes that compound growth more efficient. 

Should I Put My Whole Paycheck into Whole Life Insurance?

While you may be enthusiastic about your new IBC policy, it’s not a good idea to fund all of your income into your whole life insurance policy. You’re not going to treat your cash value like a checking account, because the administrative costs would be way too high. 

[20:55] “Let me just clear something up. This concept is actually in Nelson’s book, Becoming Your Own Banker, but people don’t read it quite clearly enough. Nelson actually says that’s the long-term goal…after you’ve established good money habits.”

In order to run your expenses through an IBC policy, you generally have to have an extremely high net worth. 

What Are the Advantages of Using the Infinite Banking Concept to Pay for College?

One of the first advantages to funding college with life insurance is that you, and your child, can control the terms of the repayment of the loan. This can provide much greater flexibility and peace of mind for a graduate. In addition, life insurance values don’t need to be reported on FAFSA forms the way 529 plans and other assets do. This means that whatever cash values you have won’t be held against you when applying for Federal aid. This can translate to more assistance, lowering what you need to borrow from your policy or other sources. 

Additionally, the owner of the policy does not have to be the one attending college. You can insure your child, and they can use their own policy to fund college. However, you can also borrow from any policy within your family banking system, depending on how you’ve structured your family system. 

The infinite banking concept may even lead you to more unique college funding options. For example, families have sometimes used policy loans to purchase an apartment complex for their child to stay in during college, renting out rooms to other students. There are many unique ways to benefit from the infinite banking concept when funding dreams.

What Are the Pros and Cons of Insuring Your Kids?

The growth on a younger child’s policy is not as great as the growth on an older person. That being said, there are some definite advantages to insuring your kids, too. For one, once you have a whole life policy on your child, you can keep that policy for their life, or gift it to them when they turn eighteen. This means that even if their health changes over the course of their young life, they at least have the benefit of that policy. 

Another advantage to this is that by funding this policy, you can set your child up with good savings habits. You can help them learn about policy loans and good stewardship of money by giving them access to the cash value to finance things they might want, such as a car, or college. 

And while the early growth may not be as significant as a policy on an older person, over time that policy is going to outperform just about any other comparable account, like a 529. The account won’t lose money, and will just grow steadily every year. 

How Does Infinite Banking Save Me Taxes?

Your cash value is growing tax-deferred. This means you’re not having to pay taxes on the growth of your cash value along the way. However, deferred means that eventually, there’s a tax that’s going to come due. However, with proper use of your policy, you won’t have to pay taxes on that growth of the cash value. 

If you fund a well-designed policy and are using the loan provision and paying those loans back, you can experience the use of your full cash value in a tax-free way. Meaning, as long as you are being a good steward of your loan provision, any money you use is not taxable. It becomes taxable if you default on your loans and have taken more than what you’ve paid into the policy. Then, it’s considered a withdrawal and is a taxable event. 

When the death benefit is paid to your heirs, it is paid out completely free of income tax. Therefore, you can have and use a policy without paying income taxes on any of the growth, if you do it properly. 

How Can I Use the Infinite Banking Concept to Invest in Real Estate and Earn Better Returns?

The benefit of Infinite Banking is being able to leverage your cash value to invest in real estate and other investments, without withdrawing funds. By leaving your cash value intact, you continue to earn interest and dividends on the gross value of your account. This means that you can earn a return through investments while still getting the maximum benefit of your compounding interest. Earning a return in two places at the same time.

It’s critical, however, that you build good habits first before you invest. The reason is that too many people decide to get started too soon, and they don’t have good habits. So they invest without a mind for paying back those policy loans, which leaves them with a lot of cash flow and very little liquidity all over again. The benefit of whole life insurance is liquidity, so you protect that by paying back the loans, ideally with the cash flow from your investment properties. Over time, you’ll create a system of passive income, if you’re patient and diligent. 

How Can I Use Infinite Banking to Increase My Retirement Income?

Using the volatility buffer strategy popularized by Dr. Wade Pfau, you can actually maximize your future retirement income. If you have an investment portfolio you intend to withdraw income from, you can use whole life insurance as a buffer for years when the market is down. By pulling income from someone else, you can preserve more of those investments, and give the account some time to recoup losses. By doing so, you can add years (even decades) to your retirement income.

[46:00] “I hope that through this conversation you are beginning to realize that I do not have a diminishing need for life insurance in my later years. There’s a prevailing opinion—not in the infinite banking space, but in the rest of the typical investment space—that as soon as you retire you no longer have a need for life insurance.”

How Can I Use Infinite Banking for Generational Wealth?

Infinite Banking is a fantastic way to create generational wealth because it provides a way to transfer your legacy to your children. The secret to true generational wealth building is creating a family system whereby you are communicating your knowledge and values to your children so that they learn how to be good stewards of your family’s wealth, too. 

By creating this system of wealth building and family legacy, you can empower your children to use what you leave them to do the same. By including your values and principles in this system of wealth, you’re creating longevity for your legacy, and hopefully leaving your family better off for generations to come. 

What Can I Do Now to Get a Policy My Future Self Will Thank Me For?

The best step you can take is the step that you take today. Your future self will thank you for getting started with a policy. As you’re shopping for a policy, remember to seek dividend paying whole life insurance with a mutual company. This is the most important piece of the equation. For deeper questions, we recommend working with an IBC practitioner or a wealth strategist who is knowledgeable about whole life insurance. That way, you can get help fine-tuning the details of the death benefit, premiums, PUAs, riders, and other considerations. 

Book A Strategy Call

Do you want to coordinate your finances so that everything works together to improve your life today, accelerate time and money freedom, and leave the greatest legacy? We can help! Book an Introductory Call with our team today at https://themoneyadvantage.com/calendar/ and find out how Privatized Banking, alternative investments, or cash flow strategies can help you accomplish your goals better and faster. That being said, if you want to find out more about how Privatized Banking gives you the most safety, liquidity, and growth… plus boosts your investment returns, and guarantees a legacy, go to https://privatizedbankingsecrets.com/freeguide to learn more.

Rachel Marshall

Rachel Marshall is the Co-Founder and Chief Financial Educator of The Money Advantage and President of Marshall's Insurance and Financial Services. She is known for making money simple, fun, and doable. Rachel has built a team of licensed professionals (investment advisors, insurance agents, attorneys, tax strategists) to help her clients create time and money freedom with cash flow strategies, Privatized Banking, and alternative investments. Rachel is the co-host of The Money Advantage podcast, the popular business and personal finance show. She teaches how to keep more of the money you make, protect it, and turn it into cash-flowing assets.
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