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Started By
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“Banking on yourself” concept
Posted on 12/10/19 at 10:18 pm
Posted on 12/10/19 at 10:18 pm
Had anyone else heard of this. Saw a guy raving about it. Seems too good to be true.
Basically you:
Purchase a whole Life policy with a rider on it.
Fund the shite out of it heavily the first couple of years
Borrow against your cash value
Pay yourself back plus interest in payments.
Seems like BS. Anyone tired to do this?
Basically you:
Purchase a whole Life policy with a rider on it.
Fund the shite out of it heavily the first couple of years
Borrow against your cash value
Pay yourself back plus interest in payments.
Seems like BS. Anyone tired to do this?
This post was edited on 12/10/19 at 10:20 pm
7
Posted on 12/10/19 at 10:35 pm to SaintNation
I don’t know, but I’m positive I’d screw it up somehow
Posted on 12/10/19 at 10:46 pm to windshieldman
Really interesting. They have a ton of articles online about it but 50% of people claim it to be a god send and 50% claim it to be a scam.
Posted on 12/10/19 at 11:17 pm to SaintNation
If it sounds too good to be true...well, you know.
Posted on 12/11/19 at 6:21 am to SaintNation
If you “fund the shite” out of a permanent insurnace policy then you’ll make it into a MEC. Then when you pull out your cash value which will be on a LIFO basis since it’s a MEC and be a taxable event.
Posted on 12/11/19 at 6:21 am to SaintNation
quote:
They have a ton of articles online about it but 50% of people claim it to be a god send and 50% claim it to be a scam.
basic math should, using reasonable assumptions and probabilities for a particular person, tell you whether or not it makes sense. 
Posted on 12/11/19 at 8:06 am to SaintNation
There was a long thread on here about it not long ago. A couple of very vocal proponents but the strong consensus was to avoid.
It is definitely not for me.
It is definitely not for me.
Posted on 12/11/19 at 8:24 am to Shepherd88
quote:
you “fund the shite” out of a permanent insurnace policy then you’ll make it into a MEC. Then when you pull out your cash value which will be on a LIFO basis since it’s a MEC and be a taxable event.
If the policy allows “paid up additions”, which any policy you from a big mutual policy company would, as you “fund the shite” out of it, the Death benefit will increase in realation to cash to keep it from a mec.
Posted on 12/11/19 at 8:37 am to bstew3006
That’s not what was stated, the OP stated the benefit was to borrow against the cash value.
Posted on 12/11/19 at 8:53 am to bstew3006
My wife and I both have whole life policies. They are expensive and I'm positive that we would have more money if we would have put the money into a 401k or IRA, however they have allowed us to do some unique things that we wouldn't have been able to do otherwise.
1) Borrow against the policy for the down payment on a house, allowing us to buy our next house without having to sell the first one. We then paid back the loan when the first house sold. I think we paid maybe $180 in interest which was well worth it for the convenience it provided.
2) Borrowed against the policy for an investment opportunity. We were making more off the investment than we were paying in interest on the loan. 18 months later when we sold the investment for 3 times what we paid for it and then paid back the loan.
Again they are expensive, they need to be designed properly, and the agent makes a really big commission, but our policies are paying for themselves at this point, and we have that cash value to borrow against should another opportunity present itself.
1) Borrow against the policy for the down payment on a house, allowing us to buy our next house without having to sell the first one. We then paid back the loan when the first house sold. I think we paid maybe $180 in interest which was well worth it for the convenience it provided.
2) Borrowed against the policy for an investment opportunity. We were making more off the investment than we were paying in interest on the loan. 18 months later when we sold the investment for 3 times what we paid for it and then paid back the loan.
Again they are expensive, they need to be designed properly, and the agent makes a really big commission, but our policies are paying for themselves at this point, and we have that cash value to borrow against should another opportunity present itself.
This post was edited on 12/11/19 at 9:53 am
Posted on 12/11/19 at 9:18 am to SaintNation
So you buy whole life, get a whole life policy.
Fund it. Then borrow against it, (noting you can't borrow more than the CSV, which in the early years is always going to be less than you paid in due to initial commissions).
Why not put all the money into investments, and take out a margin loan, and do the same thing? At least then you avoid the huge commission?
Now if you are in the 1-2 percent of Americans who are a good candidate for whole life, then maybe this isn't a bad idea.
Fund it. Then borrow against it, (noting you can't borrow more than the CSV, which in the early years is always going to be less than you paid in due to initial commissions).
Why not put all the money into investments, and take out a margin loan, and do the same thing? At least then you avoid the huge commission?
Now if you are in the 1-2 percent of Americans who are a good candidate for whole life, then maybe this isn't a bad idea.
Posted on 12/11/19 at 9:37 am to Shepherd88
quote:
That’s not what was stated, the OP stated the benefit was to borrow against the cash value.
I understand. I was addressing the “mec” and how to keep it non-taxable.
Posted on 12/11/19 at 11:10 am to LSUFanHouston
I think you mean collateralized loan. Margin is going to be more expensive. The current call rate is 3.5% and the total percentage of the rate is going to be 50-300 basis points above that depending on the dollar amount.
Collateralizing an investment account... basically the lender will send the brokerage firm a control agreement and freeze the assets from being sent out of the account unless approved by the lender. Think of it like a mortgage. You would get a better rate and not be subject to margin calls in the event we see a big downturn.
Collateralizing an investment account... basically the lender will send the brokerage firm a control agreement and freeze the assets from being sent out of the account unless approved by the lender. Think of it like a mortgage. You would get a better rate and not be subject to margin calls in the event we see a big downturn.
Posted on 12/11/19 at 11:52 am to SaintNation
I do similar to this but with Robinhood’s cheap margin.
Invest heavily, with dividend paying assets as well as growth. Tend broad conservative as opposite to aggressively risky plays.
Limit margin usage to around 30-50% of your actual limit (to limit risk exposure untimely margin calls, can be reinforced by carrying gold backed ETFs).
Maintain capital growth, with modest income with tappable cash that doesn’t incur a taxable event and your assets still can grow/throw off dividends in the background.
Yeah you lose out of the interest but the long term upside is far higher this route IMO
Invest heavily, with dividend paying assets as well as growth. Tend broad conservative as opposite to aggressively risky plays.
Limit margin usage to around 30-50% of your actual limit (to limit risk exposure untimely margin calls, can be reinforced by carrying gold backed ETFs).
Maintain capital growth, with modest income with tappable cash that doesn’t incur a taxable event and your assets still can grow/throw off dividends in the background.
Yeah you lose out of the interest but the long term upside is far higher this route IMO
This post was edited on 12/11/19 at 11:56 am
Posted on 12/11/19 at 3:20 pm to SaintNation
Get a comparison illustration of values with the same premium you're using going to base benefit. Nothing to the pua rider. Your agent will be confused and then, enlightened. Look at the dividend comparison too.
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