infinite banking be your own bank bank on yourself these are all terms used to describe a strategy that uses permanent cash value life insurance as a leveraging tool to grow money in a tax advantaged way increase liquidity and ultimately grow wealth it's also one of the most searched Financial topics on the internet right now so what is infinite Banking and how does it work let's get into it let's first start with an understanding of how Banks make money now Banks take the money that you deposit in a savings account and pay you 1 to 2%
to hold it then they loan that same money out to other parties charging them 5 to 10% more in interest rates to borrow it this is known as Arbitrage they are essentially leveraging your money earning more in interest from borrowers than they are paying interest to you and this is how Banks make money infinite banking utilizes the same methods that Banks use to put interest to work for them bypassing the bank to let individuals be their own Banker leveraging their own money and growing their own wealth in the process now perhaps the easiest way to
illustrate an infinite banking scenario is to show an example so this is Jack Jack makes good income and he's looking for ways to grow his wealth in the future but also wants to keep his money liquid for any future investment opportunities that might be coming along now maybe that's real estate investing maybe it's investing in his own business or other investment opportunities now in an infinite banking scenario Jack decid decides to fund $100,000 per year into his cash value life insurance policy for the next 5 years so after year 1 Jack has funded that first
$100,000 and in a properly designed setup now has the ability to loan possibly up to 90% of that money to himself using his $100,000 of funding as collateral for the loan so let's say Jack loans himself $50,000 Jack can now take that money and use it any way he chooses ideally on other investment opportunities that will earn him a return on that money now the highlight of the infinite banking concept is that the loan that Jack utilized in this transaction is a participating loan meaning that the original $100,000 that he deposited in the account actually
remains in the account and continues to earn interest the key word there is participating so you've got the cash value earning say 6% interest and he's being charged 4 and a half% interest on the participating loan that he took out this is where Jack is taking advantage of Arbitrage remember that term from earlier Jack is earning more in interest on the original deposit than he's paying an interest on the loan he took out on that money and don't forget he's now using that loaned money on another investment altogether maybe flipping a house or a business
investment so at the end of year two Jack has made a 10% return or $5,000 on his loan money he owes 4.5% or $2,250 on the loan he took out and he also has made 6% interest on his original deposit into the account that participating loan is what makes all of this possible and really makes infinite banking such a powerful Financial strategy now all of this was done remember without locking his money up from here Jack chooses to pay back the participating loan on his account in full plus the $2,250 in interest that he accured
over that year he now has 100% liquidity in his account and can repeat this process as many times as he likes throughout the years and over those years his account will be growing naturally as the result of compound interest being credited to his policy year after year after year at age 65 Jack's infinite banking account is conservatively Illustrated to have grown to $1.6 million in cash value and he can choose to turn that into a tax-free income stream of $100,000 per year that will last the rest of his life no matter how long he lives
remember the account that Jack established here to execute this infinite banking strategy is a permanent cash value life insurance policy the fact that it's a life insurance policy is actually what allows Jack the tax advantages and tax-free participating loans that make this strategy possible now it also creates a self-completing debt repayment plan after a lifetime of utilizing this infinite banking account the life insurance facet of Jack's infinite banking account is going to ensure that Jack's loan balance is settled up at the end if Jack were to pass away with $50,000 say in outstanding debt in
his account that $50,000 will be taken out of the accounts built in death benefit before paying the remaining money to his account's beneficiaries when designed properly infinet banking can be a powerful tool to harness the power of leveraging your money to make interest work for you now this concept is not for everyone and it really is best for the Savvy consumer who has a firm grasp on Concepts like leveraging and debt the agent Jack is working with will play a pivotal role in guiding Jack throughout the years as he makes loans and repayments to his
plan to ensure that the account remains healthy and that he doesn't over leverage his money and as always policy design and choosing to work with the right people the right insurance companies and products with the right features is key to Optimal Performance so reach out and let let us know if we can help
