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Whole Life, Infinite Banking (IBC), Cash Flow
Posted on 6/5/18 at 9:45 pm
Posted on 6/5/18 at 9:45 pm
Does anyone here have experience with using a Whole Life insurance policy to essentially “bank on yourself”. Benefit from compounding growth with money built up in cash value while borrowing from the collateral and death benefit to fund other things, like inventory and other cash flow inconsistencies.
Probably putting in 100k per year for 15 years to build the cash value around year 4 to use for my other businesses, both cash flow/inventory management and to fund future growth.
What I like is that I can receive the loan within days and not have to deal with banks, and more importantly, it’s unstructured so I can pay it back on my terms... all with simple interest... And without disturbing the real cash value compounding growth.
It’s a longer play than tradition LOC or traditional loan, but I kind of dig the control once you build up the cash value... I value the control more than the hard ROI of underlying cash premiums.
It’s like a secure by deposit loan backed with collateral of CD, brokerage, or savings account money market, but without the banks and their nuances/ and strict repayment guidelines.
If anyone with experience could chime in... even whole life salespeople... I really would value your input as I’m probably a couple of weeks away from signing. So far I really like the deal but want to hear from real people and real applications of the same thing first.
Probably putting in 100k per year for 15 years to build the cash value around year 4 to use for my other businesses, both cash flow/inventory management and to fund future growth.
What I like is that I can receive the loan within days and not have to deal with banks, and more importantly, it’s unstructured so I can pay it back on my terms... all with simple interest... And without disturbing the real cash value compounding growth.
It’s a longer play than tradition LOC or traditional loan, but I kind of dig the control once you build up the cash value... I value the control more than the hard ROI of underlying cash premiums.
It’s like a secure by deposit loan backed with collateral of CD, brokerage, or savings account money market, but without the banks and their nuances/ and strict repayment guidelines.
If anyone with experience could chime in... even whole life salespeople... I really would value your input as I’m probably a couple of weeks away from signing. So far I really like the deal but want to hear from real people and real applications of the same thing first.
6
Posted on 6/5/18 at 9:54 pm to IglooTiger
And yes. I know the salesperson will get a phat trip to the bahamas plus a shite load of commission for selling it, but I still think it’s worth it.
Posted on 6/5/18 at 10:02 pm to IglooTiger
It only works if you need the life insurance, too. There is a cost to pay for the death benefit. There is a built in annual cost to pay for maintaining the policy. And obviously, there is the initial cost to pay the commission for the origination.
You'd be better just investing in Muni's or something else tax deferred with a small penalty for early withdrawal on the chance that you don't really need the life insurance.
If you need both (life insurance and cash value), shop about 4 different options. Ask a lot of questions (fees involved to process your request for funds? Surrender charges against your funds? Tax ramifications for your cpa if you surrender the policy with an outstanding loan)
You'd be better just investing in Muni's or something else tax deferred with a small penalty for early withdrawal on the chance that you don't really need the life insurance.
If you need both (life insurance and cash value), shop about 4 different options. Ask a lot of questions (fees involved to process your request for funds? Surrender charges against your funds? Tax ramifications for your cpa if you surrender the policy with an outstanding loan)
Posted on 6/6/18 at 11:23 am to IglooTiger
If you decide to go with a whole life contract and plan on making loans at various times throughout the policy, do your full research on the company and the contract. One thing that stands out to me is the Direct Recognition vs Non-Direct Recognition of Dividends.
I would go with a company that has non-direct recognition. Here is a link that touches on the subject LINK
I am not a fan of the UL as much as others. Although there is flexibility in the payments that is attractive, your cost of insurance increases each year you get older whereas the whole life generally has a level cost of insurance each year. So if Death Benefit is a priority and you plan on keeping the policy for your entire life keep that in mind.
If you want to dive even further into dividends as to who may pay the most and the better track record to continue to do so, I would take your top 2 or 3 companies and see what makes up their dividend each year.
What percentage of their dividend is tied to their investment portfolio?
Have they increased or decreased their dividend payment in recent years?
What are their credit ratings? (Obviously go with top rated companies with a long history)
I would go with a company that has non-direct recognition. Here is a link that touches on the subject LINK
I am not a fan of the UL as much as others. Although there is flexibility in the payments that is attractive, your cost of insurance increases each year you get older whereas the whole life generally has a level cost of insurance each year. So if Death Benefit is a priority and you plan on keeping the policy for your entire life keep that in mind.
If you want to dive even further into dividends as to who may pay the most and the better track record to continue to do so, I would take your top 2 or 3 companies and see what makes up their dividend each year.
What percentage of their dividend is tied to their investment portfolio?
Have they increased or decreased their dividend payment in recent years?
What are their credit ratings? (Obviously go with top rated companies with a long history)
Posted on 6/6/18 at 12:43 pm to IglooTiger
How is your health?
Which company are you looking at?
How is the policy being structured?
Why 15 years?
Which company are you looking at?
How is the policy being structured?
Why 15 years?
Posted on 6/9/18 at 10:57 pm to IglooTiger
I think it’s a great strategy if the policy is structured that way. Every other person who says differently, doesn’t know this strategy. This may be the best financial strategy out there. Now, you can earn a higher return doing something else, but the whole premise (as you mentioned) goes back to control of the money.
I think it’s a great strategy. I do think a mutual life insurance company is the best for it. I do this as well.
I think it’s a great strategy. I do think a mutual life insurance company is the best for it. I do this as well.
Posted on 6/11/18 at 1:15 pm to IglooTiger
I don't subscribe to IBC.
When you overfund the life policy you are prepaying for the paid-up addition of the future death benefit. The paid-up addition on the base amount is what is creating the higher dividend accumulation, not the paid-up addition cash purchase.
It has never computed to be to my advantage to pre-pay for the paid-up addition, but it is to my advantage to purchase the policy base benefit as large as possible and leave cash elsewhere for liquidity.
The eventual cash in the base policy increases substantially to be utilized for investment moves and the income tax free dividend will be useful at my retirement.
The income tax free death benefit will cover my eventual spending of assets as the "leverage". This is part of my plan.
Bring on the downvotes for knowing what I'm doing.
When you overfund the life policy you are prepaying for the paid-up addition of the future death benefit. The paid-up addition on the base amount is what is creating the higher dividend accumulation, not the paid-up addition cash purchase.
It has never computed to be to my advantage to pre-pay for the paid-up addition, but it is to my advantage to purchase the policy base benefit as large as possible and leave cash elsewhere for liquidity.
The eventual cash in the base policy increases substantially to be utilized for investment moves and the income tax free dividend will be useful at my retirement.
The income tax free death benefit will cover my eventual spending of assets as the "leverage". This is part of my plan.
Bring on the downvotes for knowing what I'm doing.
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