I have been getting a lot of inquires lately about infinite banking life insurance.
Firstly, infinite banking is not life insurance. But rather, infinite banking is a concept. There are many other descriptions for the same idea. Be your own banker. Circle of Wealth. Perpetual Banking. Money in Motion. Wealth in motion. Bank on yourself. All really describing the same idea/concept.
What is the concept?
The concept is all about creating wealth by borrowing against your assets to purchase more assets. (as described by Robert Kawasaki in Rich Dad, Poor Dad … assets create an income). If you’ve ever borrowed against your home to buy a rental property … you’ve been your own banker. If you’ve ever refinanced a rental property to pull out money to purchase another property … you’ve put your wealth in motion. If you’ve ever borrowed money to convert a single-family home to a duplex you’ve banked on yourself. If you’ve every used your line of credit to fund a private mortgage you’re infinite banking. If you’ve ever taken out a policy loan from your permanent cash value insurance to purchase a property … well, you get the idea.
Why are the concepts promoting life insurance?
I am not surprised that LEAP, Circle of Wealth, Infinite Banking etc. are all used to promote life insurance and never to promote investment properties. It’s the same reason that financial planners (except me) rarely promote the idea of investing in an income property … they can’t make an income from it. But Infinite Banking, Circle of Wealth, Wealth in Motion … whatever you want to call it is not life insurance. It’s a concept … that you can use with life insurance or investments … to grow and protect your wealth.
In fact I use the concept to promote both – the power of two – combining cash value insurance with investment properties.
So what’s up with the life insurance?
You may need life insurance. You might not need insurance. But if you are wealthy, and you want to be wealthier, and you want to create a greater income from your wealth … like double the income from your wealth … you should want it.
If you don’t own cash value life insurance you either can’t afford it, or don’t understand it. Which camp are you in?
Your wealth trajectory might be to be worth $5M at age 60. It might be $50M. And you might be expecting to live off of 4% of that money or expecting it to shoot off 8% a year. I can show you how to create double your income projections – with less risk.
No matter what your number is … I show you how to create a world with greater wealth and greater income.
Why invest in life insurance?
I don’t invest in my insurance plan for the main purpose being my own banker (although that is a huge advantage).
Here are the main reasons:
- I can create twice the income in retirement.
- I benefit from tax free growth and tax-free income in retirement.
- I have liquidity, use and control of my wealth (unlike an RSP)
- I want to leave money to beneficiaries.
Its not the fact that I can borrow against the policy for wealth strategies (income properties, private mortgages, trading account). Borrowing/Collateralizing is just the mechanism whereby I gain tax free access. In fact tax deductible access if I am borrowing for investments.
My goal in retirement is to create an income of $10,000 a month and pay zero tax. And I will achieve this by 1. having an income from my investment properties and will use the depreciation available to me to postpone tax (hopefully until death), 2. Creating a tax-free income from my insurance policy and 3. Refinancing properties to create tax free income. Its not the money you have, it’s the money your keep. Putting in place now the plan to save taxes over your lifetime.
There is no one that loves, uses, and promotes the “Be your own banker” concept more than me.
We invest $50K a year into our insurance plans … and borrow it all back out for wealth strategies. We have purchased 3 investment properties and funded an option trading account with the funds. But if it were only about the infinite banking concept … we would just have stuck to income properties.
- Its about what the insurance will do for us in retirement.
- Its about not wasting our money on term insurance with little hope of any return.
- Its about getting us the coverage we need and want.
- Its about replacing GICs (at 0%) with a safe alternate investment earning 6- 8% typically.
- Its about diversification away from the stock and real estate markets.
Infinite banking is just one of the bonus advantages cash value insurance gives us.
Can you do infinite banking without life insurance? Absolutely. You probably already have. But if you’d like to find out more about how cash value life insurance can improve your wealth plan and continue to give you access to your money for wealth strategies … please reach out.