All
Members
Companies
Blog
Forums
Podcast
Webinars
    User Log in  /  Sign up
  • Forums
    Newest Posts Trending Discussions Followed Forums Real Estate News & Current Events General Landlording & Rental Properties Buying & Selling Real Estate Deal Analysis See All
  • Education

    Read

    BiggerPockets Blog BPInsights: Expert Analysis Coronavirus Content & Resources Guides Glossary Reviews Member Blogs

    Watch

    Webinars Video Library Financial Independence Blueprint Intro to Real Estate: Rentals

    Listen

    BiggerPockets Real Estate Podcast BiggerPockets Money Podcast BiggerPockets Business Podcast Real Estate Rookie Podcast Daily Podcast (Audio Blog)

    Topics

    Business Operations Finance Finding Deals Property Management Property Types Strategy
  • Network

    Recommended Vendors

    Real Estate Agents Mortgage Lenders Companies Hard Money Lenders Contractors Investment Companies

    Search

    Members Events Jobs
  • Tools

    Calculators

    Rental Property Fix and Flip BRRRR Rehab Estimator
    Wholesaling Mortgage Payment 70% Rule Airbnb

    Services

    BPInsights: Property Insights Tenant Screening Property Management Lease Agreement Packages

    New Feature

    BPInsights (beta)

    Quickly analyze a property address or ZIP Code to compare your rent in your neighborhood.

    Analyze a property
  • Find Deals
    Real Estate Listings Find Foreclosures External Link Ads, Jobs, and Other
  • Bookstore

    Real Estate Books

    Profit Like The Pros Bidding to Buy See all books

    Featured Book

    BiggerPockets Wealth Magazine book cover
    BiggerPockets Wealth Magazine

    Written by financial journalists and data scientists, get 60+ pages of newsworthy content, expert-driven advice, and data-backed research written in a clear way to help you navigate your tough investment decisions in an ever-changing financial climate! Subscribe today and get the Oct/Nov issue delivered to your door!

    Get the Magazine
  • Pricing
Log In Sign up
User
Quick search links
Podcast Hard Money Lenders Books Washington
ForumsArrowPersonal Finance ForumArrowInfinite Banking? Do or Don’t
  • Newest Posts
    • Newest Posts
    • Unanswered Discussions
  • Trending
    • Top Discussions
    • Trending Discussions
  • Browse Forums
Search Nova
Topic: 1031 Exchanges Topic: Akron Real Estate Forum Topic: Alabama Real Estate Q&A Discussion Forum Topic: Alaska Real Estate Q&A Discussion Forum Topic: Alberta Real Estate Forum Topic: Albuquerque Topic: Allentown Real Estate Forum Topic: Anchorage Real Estate Forum Topic: Ann Arbor Topic: Arizona Real Estate Q&A Discussion Forum Topic: Arkansas Real Estate Q&A Discussion Forum Topic: Arlington Real Estate Forum Topic: Asheville NC Real Estate Forum Topic: Ask About A Real Estate Company Topic: Athens Real Estate Forum Topic: Atlanta Real Estate Forum Topic: Aurora Real Estate Forum Topic: Aurora Real Estate Forum Topic: Austin Real Estate Forum Topic: Bakersfield Real Estate Forum Topic: Baltimore Real Estate Forum Topic: Bankers, Lenders, and Mortgage Brokers Topic: Baton Rouge Real Estate Forum Topic: Beaverton Real Estate Forum Topic: BiggerPockets Business Podcast Topic: BiggerPockets Exclusive PRO Area Topic: BiggerPockets Money Podcast Topic: BiggerPockets Real Estate Investing Summit Topic: BiggerPockets Summer Reading List Topic: BiggerPockets Webinar Discussion Forum Topic: Billings Real Estate Forum Topic: Birmingham Real Estate Forum Topic: Bismarck Real Estate Forum Topic: Boise Real Estate Forum Topic: Boston Real Estate Forum Topic: Bridgeport Real Estate Forum Topic: British Columbia Real Estate Forum Topic: BRRRR - Buy, Rehab, Rent, Refinance, Repeat Topic: Buying & Selling Real Estate Discussion Topic: California Real Estate Q&A Discussion Forum Topic: Cambridge Real Estate Forum Topic: Canadian Real Estate Topic: Cape Cod Real Estate Forum Topic: Cape Coral Real Estate Forum Topic: Casper Real Estate Forum Topic: Cedar Rapids Real Estate Forum Topic: Chandler Real Estate Forum Topic: Charleston Real Estate Forum Topic: Charleston Real Estate Forum Topic: Charlotte Real Estate Forum Topic: Chattanooga Real Estate Forum Topic: Chesapeake Real Estate Forum Topic: Cheyenne Real Estate Forum Topic: Chicago Real Estate Forum Topic: Chittenden County Real Estate Forum Topic: Cincinnati Real Estate Forum Topic: Cleveland Real Estate Forum Topic: Coastal NC Real Estate Forum Topic: Colorado Real Estate Q&A Discussion Forum Topic: Colorado Springs Real Estate Forum Topic: Columbia Real Estate Forum Topic: Columbia Real Estate Forum Topic: Columbus Real Estate Forum Topic: Columbus Real Estate Forum Topic: Commercial Real Estate Investing Forum Topic: Completed Deal Diaries Topic: Connecticut Real Estate Q&A Discussion Forum Topic: Construction & Remodeling Diaries Topic: Contractors Topic: Conway Real Estate Forum Topic: Coronavirus Conversation Topic: Coronavirus Government Assistance Programs Topic: Creative Real Estate Financing Forum Topic: Currently Under Contract Topic: Dallas Real Estate Forum Topic: Davenport Real Estate Forum Topic: Dayton Real Estate Forum Topic: Delaware Real Estate Q&A Discussion Forum Topic: Denver Real Estate Forum Topic: Des Moines Real Estate Forum Topic: Detroit Real Estate Forum Topic: Do it Yourself Topic: El Paso Real Estate Forum Topic: Eugene Real Estate Forum Topic: Evansville Real Estate Forum Topic: FAQ Forum Topic: Fargo Topic: Fayetteville Real Estate Forum Topic: First Time Home Buyer Topic: Florida Real Estate Q&A Discussion Forum Topic: Foreigners Buying in the USA Topic: Fort Collins Real Estate Forum Topic: Fort Lauderdale Real Estate Forum Topic: Fort Smith Real Estate Forum Topic: Fort Wayne Real Estate Forum Topic: Fort Worth Real Estate Forum Topic: Fresno Real Estate Forum Topic: General Foreclosure & Pre-Foreclosure Forums Topic: General Landlording & Rental Properties Topic: General Real Estate Investing Topic: Georgia Real Estate Q&A Discussion Forum Topic: Germantown Real Estate Forum Topic: Get Foreclosure Help - Stop Foreclosure Forum Topic: Gilbert Real Estate Forum Topic: Glendale Real Estate Forum Topic: Goals, Business Plans & Entities Topic: Grand Rapids Real Estate Forum Topic: Green Bay Topic: Greensboro Real Estate Forum Topic: Hammond Real Estate Forum Topic: Hartford Real Estate Forum Topic: Hawaii Real Estate Q&A Discussion Forum Topic: Henderson Real Estate Forum Topic: Hialeah Real Estate Forum Topic: Hilo Real Estate Forum Topic: Home Owner Association (HOA) Issues & Problems Forum Topic: Honolulu Real Estate Forum Topic: Housing News & Real Estate Market Discussions Topic: Houston Real Estate Forum Topic: HUD, VA, and Tax Sales Topic: Huntington Real Estate Forum Topic: Huntsville Real Estate Forum Topic: Idaho Falls Real Estate Forum Topic: Idaho Real Estate Q&A Discussion Forum Topic: Illinois Real Estate Q&A Discussion Forum Topic: Indianapolis Real Estate Forum Topic: Indiana Real Estate Q&A Discussion Forum Topic: Innovative Strategies Topic: Interest Rate Drops Topic: International Real Estate Topic: Investor Deal Diaries Topic: Investor Psychology Topic: Iowa Real Estate Q&A Discussion Forum Topic: Jackson Real Estate Forum Topic: Jacksonville Real Estate Forum Topic: Jersey City Real Estate Forum Topic: Job Loss/Company Closings Topic: Joliet Real Estate Forum Topic: Jonesboro Real Estate Forum Topic: Kailua Real Estate Forum Topic: Kānèohe Real Estate Forum Topic: Kansas City Real Estate Forum Topic: Kansas City Real Estate Forum Topic: Kansas Real Estate Q&A Discussion Forum Topic: Kentucky Real Estate Q&A Discussion Forum Topic: Knoxville Real Estate Forum Topic: Lakewood Real Estate Forum Topic: Landlord Problem Solving Topic: Las Cruces Real Estate Forum Topic: Las Vegas Real Estate Forum Topic: Lewiston Real Estate Forum Topic: Lexington-Fayette Real Estate Forum Topic: Lincoln Real Estate Forum Topic: Little Rock Real Estate Forum Topic: Local Real Estate Networking Topic: Long Beach Real Estate Forum Topic: Long Island Real Estate Forum Topic: Los Angeles County Real Estate Forum Topic: Louisiana Real Estate Q&A Discussion Forum Topic: Louisville Real Estate Forum Topic: Madison Real Estate Forum Topic: Maine Real Estate Q&A Discussion Forum Topic: Managing Your Property Topic: Manchester Real Estate Forum Topic: Manitoba Topic: Marketing Your Rental Topic: Marketplace Topic: Maryland Real Estate Q&A Discussion Forum Topic: Massachusetts Real Estate Q&A Discussion Forum Topic: Meads Real Estate Forum Topic: Memphis Real Estate Forum Topic: Meridian Real Estate Forum Topic: Mesa Real Estate Forum Topic: Miami Topic: Michigan Real Estate Q&A Discussion Forum Topic: Military Investing Topic: Milwaukee Real Estate Forum Topic: Minneapolis Real Estate Forum Topic: Minnesota Real Estate Q&A Discussion Forum Topic: Mississippi Real Estate Q&A Discussion Forum Topic: Missoula Real Estate Forum Topic: Missouri Real Estate Q&A Discussion Forum Topic: Mobile (Alabama) Real Estate Forum Topic: Mobile Homes & Mobile Home Park Investing Topic: Modesto/Merced Real Estate Forum Topic: Montana Real Estate Q&A Discussion Forum Topic: Montgomery Real Estate Forum Topic: Mortgage Payment Suspension Topic: Mt. Pleasant Real Estate Forum Topic: Multi-Family and Apartment Investing Forums Topic: Nampa Real Estate Forum Topic: Naperville Real Estate Forum Topic: Nashville Real Estate Forum Topic: Nebraska Real Estate Q&A Discussion Forum Topic: Nevada Real Estate Q&A Discussion Forum Topic: Newark Real Estate Forum Topic: New Brunswick Real Estate Forum Topic: Newfoundland and Labrador Real Estate Forum Topic: New Hampshire Real Estate Q&A Discussion Forum Topic: New Haven Real Estate Forum Topic: New Jersey Real Estate Q&A Discussion Forum Topic: New Member Introductions Topic: New Mexico Real Estate Q&A Discussion Forum Topic: New Orleans Real Estate Forum Topic: New York City Real Estate Forum Topic: New York Real Estate Q&A Discussion Forum Topic: Norfolk Real Estate Forum Topic: North Carolina Real Estate Q&A Discussion Forum Topic: North Dakota Real Estate Q&A Discussion Forum Topic: Northwest Territories Real Estate Forum Topic: Norwalk Real Estate Forum Topic: Nova Scotia Real Estate Forum Topic: Nunavut Real Estate Forum Topic: Oakland Real Estate Forum Topic: Off-Topic Topic: Ogden Topic: Ohio Real Estate Q&A Discussion Forum Topic: Oklahoma City Real Estate Forum Topic: Oklahoma Real Estate Q&A Discussion Forum Topic: Omaha Real Estate Forum Topic: Ontario Real Estate Forum Topic: Orange County Real Estate Forum Topic: Oregon Real Estate Q&A Discussion Forum Topic: Orlando Real Estate Forum Topic: Overland Park Real Estate Forum Topic: Pearl City Real Estate Forum Topic: Pennsylvania Real Estate Q&A Discussion Forum Topic: Peoria Real Estate Forum Topic: Personal Finance Forum Topic: Philadelphia Real Estate Forum Topic: Phoenix Real Estate Forum Topic: Pittsburgh Real Estate Forum Topic: Pocatello Real Estate Forum Topic: Portland Real Estate Forum Topic: Portland Real Estate Forum Topic: Prince Edward Island Real Estate Forum Topic: Private Lending & Conventional Mortgage Advice Topic: Property Insurance Questions & Discussions Topic: Providence Real Estate Forum Topic: Provo Real Estate Forum Topic: Quad Cities Real Estate Forum Topic: Quebec Real Estate Forum Topic: Questions About BiggerPockets and Official Site Announcements Topic: Raleigh Real Estate Forum Topic: Rapid City Real Estate Forum Topic: Real Estate Agent Forums Topic: Real Estate Crowdfunding Forums Topic: Real Estate Deal Analysis and Advice Topic: Real Estate Development & New Home Construction Topic: Real Estate Events and Happenings Topic: Real Estate Guru, Book & Course Reviews and Discussions Topic: Real Estate Investor Marketing Help & Advice Topic: Real Estate News & Current Events Topic: Real Estate Not-So-Successful Stories Topic: Real Estate Quizzes Topic: Real Estate Rookie Podcast Topic: Real Estate Success Stories Topic: Real Estate Technology, Social Media & Blogging Topic: Real Estate Wholesaling Questions & Answers Topic: Rehabbing and House Flipping Topic: Reno Real Estate Forum Topic: Renters Discussion Topic: Rent to Own a.k.a. Lease Purchase, Lease Options Topic: REOs Topic: Rhode Island Real Estate Q&A Discussion Forum Topic: Richmond Real Estate Forum Topic: Rio Grande Valley Real Estate Forum Topic: Riverside Real Estate Forum Topic: Rochester Real Estate Forum Topic: Rockford Real Estate Forum Topic: Sacramento Real Estate Forum Topic: Saint Paul Real Estate Forum Topic: Salem Real Estate Forum Topic: Salt Lake City Real Estate Forum Topic: San Antonio Real Estate Forum Topic: San Diego Real Estate Forum Topic: Sandy Springs Real Estate Forum Topic: San Francisco Real Estate Forum Topic: San Jose Real Estate Forum Topic: San Luis Obispo Real Estate Forum Topic: Santa Fe Real Estate Forum Topic: Saskatchewan Real Estate Forum Topic: Savannah Real Estate Forum Topic: Scottsdale Real Estate Forum Topic: Seattle Real Estate Forum Topic: Short Sales Questions Topic: Short-Term and Vacation Rental Discussion Topic: Shreveport Real Estate Forum Topic: Sioux City Real Estate Forum Topic: Sioux Falls Real Estate Forum Topic: South Bend Real Estate Forum Topic: South Carolina Real Estate Q&A Discussion Forum Topic: South Dakota Real Estate Q&A Discussion Forum Topic: Southeast NC Real Estate Forum Topic: Spokane Real Estate Forum Topic: Springdale Real Estate Forum Topic: Springfield Real Estate Forum Topic: Stamford Real Estate Forum Topic: Starting Out Topic: St. Louis Real Estate Forum Topic: Stockton Real Estate Forum Topic: St. Petersburg Real Estate Forum Topic: STR Strategies Under Travel Restrictions Topic: Surprise Real Estate Forum Topic: Tacoma Real Estate Forum Topic: Tallahassee Real Estate Forum Topic: Tampa Real Estate Forum Topic: Tax, Legal Issues, Contracts, Self-Directed IRA Topic: Tax Liens, Notes, Paper, & Cash Flows Discussion Topic: Tempe Real Estate Forum Topic: Tenant Screening Topic: Tennessee Real Estate Q&A Discussion Forum Topic: Texas Real Estate Q&A Discussion Forum Topic: Thornton Real Estate Forum Topic: Toledo Real Estate Forum Topic: Topeka Real Estate Forum Topic: Tucson Real Estate Forum Topic: Tulsa Real Estate Forum Topic: Tuscaloosa Real Estate Forum Topic: Upstate New York Real Estate Forum Topic: Utah Real Estate Q&A Discussion Forum Topic: Vancouver Real Estate Forum Topic: Vermont Real Estate Q&A Discussion Forum Topic: Virginia Beach Real Estate Forum Topic: Virginia Real Estate Q&A Discussion Forum Topic: Waipahu Real Estate Forum Topic: Waipahu Real Estate Forum Topic: Warren Real Estate Forum Topic: Warwick Real Estate Forum Topic: Washington D.C. Real Estate Q&A Discussion Forum Topic: Washington Real Estate Q&A Discussion Forum Topic: Waterbury Real Estate Forum Topic: Westchester County Real Estate Forum Topic: Western NC Real Estate Forum Topic: West Gulfport Real Estate Forum Topic: West Virginia Real Estate Q&A Discussion Forum Topic: Wichita Real Estate Forum Topic: Wilkes Barre Scranton Real Estate Forum Topic: Wilmington Real Estate Forum Topic: Wisconsin Real Estate Q&A Discussion Forum Topic: Worcester Real Estate Forum Topic: Wyoming Real Estate Q&A Discussion Forum Topic: Yukon Real Estate Forum
Create post

Infinite Banking? Do or Don’t

19 Replies

  • Share on Facebook
  • Share on Twitter
  • Share on LinkedIn
Rotate Log in or sign up to reply
user profile avatar
  • Posts 2
  • Votes 0

Darrell Bazemore
from Atlanta, GA

posted 7 months ago

Hey there,

I’ve recently come across this concept and after doing light research I cant seem to find anything wrong with this personal finance system thus far. I got a quote to see what the cash value is year 1 and it looks good too (guaranteed $6500 & $13.3k end of year 1 and 2 respectively). Even though I understand that I would need to put $500 minimum per month to make it work, but if I break even on payments vs cash value in like early YR 3, would it not be worth it? Couple of details: guaranteed growth rate 4% insurance company has been paying out dividends at 6% and policy loan interest rate is at 5%. Payments around $600/mo which I can build around that. What do you think? Am I crazy or would this be a good idea?

Rotate Log in or sign up to reply
user profile avatar
  • Posts 3.6K
  • Votes 2.1K

Steve Morris
Real Estate Broker from Portland, OR

replied 7 months ago

Well, I'd check my forward-looking assumptions

That's how NPV works a dollar today worth a lot more than a dollar 10 years from now.  In addition, you know you're a little ahead today for sure, but things change.

Rotate Log in or sign up to reply
user profile avatar
  • Posts 1.4K
  • Votes 534

Bill Hampton
Tax Strategist and Fee-only Financial Planner from Atlanta, GA

replied 7 months ago

@Darrell Bazemore 

Don't do it.

The big pitch with Infinite Banking is the idea of "banking on yourself" i.e. having liquidity both now and in the future with an investment account that is tax-free. I've gotten the pitch before and the tax-free component of taking loans on your own life insurance policy cash value without those loans showing up on our tax return is a BIG part of the Infinite Banking pitch.

A Roth IRA and a Roth 401(k) solves this as you can contribute $25,500 per year between both Roth accounts. If you are married, double that to $51,000 per year into a tax-deferred AND tax-free account. Yes, there are 5-year withdrawal rules to follow but your principal contributions to a Roth are accessible. The tax-free and the liquidity "problem" are solved through Roth accounts. If your income exceeds the Roth IRA income threshold limits, and you already have Traditional IRA accounts, I recommend transferring the IRAs into your current 401(k) Plan(s), assuming incoming rollovers are allowed. A $0 IRA balance will allow you to begin performing two-step Roth IRA contributions, also known as back-door Roth contributions.

I should also mention that for 99.5% of the population who are married couples, saving and investing $51,000 PER YEAR should be just fine for retirement savings. If you are age 50 or older, you can contribute another $15,000 per year in catch-up contributions. So $66,000 per year into Roth accounts.....and I haven't even touched on the mega-back door Roth option.

So in terms of liquidity, control, and large funding opportunity, the Roth options are more than enough for nearly everyone saving for retirement.

Good luck and let me know if I can be of assistance. 

Rotate Log in or sign up to reply
user profile avatar
Check Rosette Top Subjects:
Traditional Financing, Real Estate Finance, and Maintenance
  • Posts 2.1K
  • Votes 1.4K

Carl Fischer
Rental Property Investor from Ambler, PA

replied 7 months ago

@Bill Hampton great explanation and alternate thought.

Rotate Log in or sign up to reply
user profile avatar
  • Posts 1
  • Votes 5

Kyle Mans

replied 7 months ago

Don't get caught up with rates of return when implementing IBC. The IBC is a thought process that uses properly structured whole life insurance as a place to warehouse wealth that gives you control, liquidity, and guarantees. It is NOT an investment. You can still invest in stocks, real estate, or whatever you want, but running it through your policy first adds velocity to your money and allows you to recapture lost opportunity cost. Do some more research and you will find your answers. I did 7 months of research before starting my first policy. 

Rotate Log in or sign up to reply
user profile avatar
Check Rosette Top Subjects:
Traditional Financing, Taxes & Accounting, and Real Estate Finance
  • Posts 900
  • Votes 532

Mike S.
Investor from Broward County, FL

replied 7 months ago

WL and IUL are giving a low, but tax free return that is lower than the stock market, but higher than other safe investments. You don't have any volatility issue with down years. It is also, in most state, asset protected against judgments.

But where these contracts have a big difference with ROTH IRA, 401k and other retirement plans are:
- we don't know if congress won't start taxing ROTH in future years to catch up on some of the country debts.
- you can get a low interest loan secured by your cash value in your life insurance to invest in other placements. The loan can't get refused because of your credit, debt ratio, etc..., and you have multiple options to choose from (outside lender with interest only payment, life insurance with your own repayment schedule). During that time your full cash value is still continuing to grow in the life insurance policy (often faster than the loan interest) while your loan is also getting a return that would be way more than the interest that you are paying on it. If you are using the loan into a business, you can also expense the interest.
- during retirement, by using loans against the policy, you don't have minimum required distribution (contrary to the ROTH 401k), you can get way more than the usual 4% distribution rate advised for IRA and 401k without risking to outlive your wealth, as the cash value continue to grow sometime even faster than you take a loan out.
- as a bonus, you get a life insurance policy for your family if you were to pass away in your younger years. Later in life, the death benefit would be closer to your cash value and won't really add any benefit vs the accumulated cash value.

The cons are the higher cost of a life insurance policy in the early years as you are paying upfront all the fee and commission. However, on the long run, after year 10 usually, the running cost of the policy is around 0.25% of the cash value. Equivalent to a low cost ETF in a standard IRA account, but probably way lower than any self directed IRA, employer 401k or advisor account.

Rotate Log in or sign up to reply
user profile avatar
Check Rosette Top Subject:
Maintenance
  • Posts 2.2K
  • Votes 2.5K

Bill Brandt
Investor from Las Vegas, NV

replied 7 months ago

Nope. Was an ok idea when interest rates were above 12% and it was invented. Was a bad idea once interest rates got below 6% and a horrible deal now. Just click on the magnifying glass in upper right and learn why. 

Rotate Log in or sign up to reply
user profile avatar
Check Rosette Top Subjects:
Rentals, Team, and Traditional Financing
  • Posts 451
  • Votes 343

Mark F.
Rental Property Investor from Bergen County, NJ

replied 7 months ago
Originally posted by @Bill Hampton :

@Darrell Bazemore 

Don't do it.

The big pitch with Infinite Banking is the idea of "banking on yourself" i.e. having liquidity both now and in the future with an investment account that is tax-free. I've gotten the pitch before and the tax-free component of taking loans on your own life insurance policy cash value without those loans showing up on our tax return is a BIG part of the Infinite Banking pitch.

A Roth IRA and a Roth 401(k) solves this as you can contribute $25,500 per year between both Roth accounts. If you are married, double that to $51,000 per year into a tax-deferred AND tax-free account. Yes, there are 5-year withdrawal rules to follow but your principal contributions to a Roth are accessible. The tax-free and the liquidity "problem" are solved through Roth accounts. If your income exceeds the Roth IRA income threshold limits, and you already have Traditional IRA accounts, I recommend transferring the IRAs into your current 401(k) Plan(s), assuming incoming rollovers are allowed. A $0 IRA balance will allow you to begin performing two-step Roth IRA contributions, also known as back-door Roth contributions.

I should also mention that for 99.5% of the population who are married couples, saving and investing $51,000 PER YEAR should be just fine for retirement savings. If you are age 50 or older, you can contribute another $15,000 per year in catch-up contributions. So $66,000 per year into Roth accounts.....and I haven't even touched on the mega-back door Roth option.

So in terms of liquidity, control, and large funding opportunity, the Roth options are more than enough for nearly everyone saving for retirement.

Good luck and let me know if I can be of assistance. 

One of the best arguments I've seen against infinity banking for the average person. Great post.  

Rotate Log in or sign up to reply
user profile avatar
Check Rosette Top Subject:
Rentals
  • Posts 3.2K
  • Votes 8.7K

Mike Dymski
Investor from Greenville, SC

replied 7 months ago

@Bill Hampton Few employer sponsored 401k plans offer after-tax contributions above the pre-tax amount or in-service distributions. I thought those were required to execute the mega back door Roth that you are describing.  Am I missing something?

Rotate Log in or sign up to reply
user profile avatar
Check Rosette Top Subject:
Team
  • Posts 592
  • Votes 416

Thomas Rutkowski
Financial Advisor from Boynton Beach, FL

replied 7 months ago

@Darrell Bazemore

If you don't mind doing a little reading, this subject was beat to death in this thread: https://www.biggerpockets.com/forums/519/topics/245380-paradigm-life-infinite-banking-whole-life-insurance?page=3 and several others here on BP.

As you've no doubt seen, there are wide ranging opinions, but very few people who actually understand how permanent life insurance works. A properly designed, and maximum over-funded policy is not the same as the typical whole life that most of these people think they understand.

Rotate Log in or sign up to reply
user profile avatar
Check Rosette Top Subjects:
Analyze Deals, Traditional Financing, and Residential
  • Posts 3.6K
  • Votes 2.0K

Lane Kawaoka
Rental Property Investor from Honolulu, HAWAII (HI)

replied 7 months ago

I don't agree with anything said here. 

IBC is higher net worth investors with net worth at least 500k because they have extra liquidity where lower networth should be using every dollar to invest (and not pay heavy insurance fees).

Rotate Log in or sign up to reply
user profile avatar
  • Posts 73
  • Votes 54

Jamie O'Brien
Flipper/Rehabber from Birmingham, AL

replied 7 months ago
Originally posted by @Lane Kawaoka :

I don't agree with anything said here. 

IBC is higher net worth investors with net worth at least 500k because they have extra liquidity where lower networth should be using every dollar to invest (and not pay heavy insurance fees).

Lane, thats an interesting statement as I've never heard anyone make that argument, however, I don't agree nor disagree. You make a valuable point about extra liquidity, which IBC requires, to get the policy(ies) rolling. The arguments about using your 401k or other qualified plans, I totally disagree with on some level. All I can speak to is my experience with IBC.

I'm only 3 years in, so I don't have a wealth of knowledge... yet. What I like about IBC is control. I believe that tax rates must go up in my lifetime, and I never plan on making LESS money as I age, meaning my tax bracket should continue to go up. Just because I don't pay takes on qualified plan gains this year, doesn't mean I won't. I think there is a real chance that tax rates will be much higher by the time I reach retirement than they are today. Don't even get me started on the uncertainty and lack of control of investing in the stock market. I use my IBC policies as my savings account, that just happens to earn 3-5% interest, plus dividends (when structured correctly with a mutual company). I've been able to buy property, and make several short term loans using the policies I currently have set up, while my cash value of the policy continues to grow, uninterrupted. Could I have done that with a 401k, or a regular savings account, yes, but I would have given up opportunity cost of my net cash value growing WHILE earning interest elsewhere. I have policies on my two children that will pay for their first car, college, weddings, and hopefully first house or a good portion of it. I'm not against leveraging from banks, in fact, in our interest rate market, I think it's smart to use lower interest from banks, while it's available, and earn higher interest returns on my IBC money.

Understanding YOUR current financial picture and FUTURE financial picture is important while building one of these policies. Also, working with someone who practices this concept and fully understands the structure and the process has been super helpful.

I encourage anyone interested to real Nelson Nash's book, Becoming Your Own Banker (multiple times) and find resources that can help educate and coach you through the process. I'll be happy to put anyone in contact with my coaches here in Birmingham. They mentored directly under Nelson and I actually was able to have lunch with Nelson before he passed at their office. 

There is a great podcast that these guys put out called "Wealth Without Wallstreet" that dives into IBC as well as the many ways to build passive income using your policies. 

I'm not an expert yet, but I do believe it will be a powerful tool in my wealth creation and pursuit of financial freedom!

 

Rotate Log in or sign up to reply
user profile avatar
Check Rosette Top Subject:
Taxes & Accounting
  • Posts 132
  • Votes 104

Greg O'Brien
Accountant from Boston, MA

replied 7 months ago

@Jamie O'Brien well said. A concept that is misunderstood by many planners and the public. A very very specific policy must be designed for YOU based on a variety of factors. For any client that wants to learn more, I would recommend 90 days of deep studying into the concept before even talking to a provider.

Rotate Log in or sign up to reply
user profile avatar
Check Rosette Top Subject:
Rentals
  • Posts 342
  • Votes 260

Matt Millard
from Lewisville, Texas

replied 7 months ago

See Tom Rutkowski our of Florida. One of the worlds top experts on infinite banking.

I’ve done a regular whole life policy & it’s now aged & primed to borrow low rate policy loans against it.

I’m not doing more personally as I got attacked with a $500k+ debt bomb a couple years ago that was not in my control right as we are facing a violent economic storm & dollar currency collapse.

I recommend people move assets they don’t want to lose & grow into silver & crypto!

Rotate Log in or sign up to reply
user profile avatar
Check Rosette Top Subject:
Maintenance
  • Posts 2.2K
  • Votes 2.5K

Bill Brandt
Investor from Las Vegas, NV

replied 7 months ago

Doing it today would be as dumb as buying an annuity today. You’re locking in low returns. I personally don’t believe Schiff or kyosaki’s predictions of massive inflation coming, but if it does you’ll get crushed when interest rates sky rocket. I guess fi you’re too scared to buy any real estate, and you’ve maxed out your work and Roth contributions, it’s better than a savings account. 

Rotate Log in or sign up to reply
user profile avatar
  • Posts 49
  • Votes 3

Michael Zagorsky
from West Melbourne, FL

replied 6 months ago

worth a read:  https://www.whitecoatinvestor....

Rotate Log in or sign up to reply
user profile avatar
Check Rosette Top Subject:
Taxes & Accounting
  • Posts 132
  • Votes 104

Greg O'Brien
Accountant from Boston, MA

replied 6 months ago

@Michael Zagorsky old article but it really is factually incorrect. As a tax person, the author is flat out wrong on a few points from an IRC perspective. Also, the author (not sure who he is) calling IBanking an investment is wrong as well or he missed the point. Summary is good tho but that article has floated around the web for years and has flaws.

Rotate Log in or sign up to reply
user profile avatar
  • Posts 49
  • Votes 3

Michael Zagorsky
from West Melbourne, FL

replied 6 months ago

In general, every time I look into Infinite banking, the more I think it's a bad item:

First, there are plenty of tax advantage strategies to save/invest money:

1. Mega-Backdoor 401k's

2. Opportunity Zone investing

3. 1031 exchanges

4.  Self directed solo-401k's

5. Self-Employed LLC taxed as a S Corp.

All of these can be explained in a couple of minutes and understood by most people.  That said, every time I read about 'infinite banking' the more confusing the subject becomes.  The answer seems to always funnel to a commission salesperson who can answer my questions.  Why is that?  Why it is that I can understand the tax advantages of moving a business to Puerto Rico but somehow I can't come to a complete understanding of 'infinite banking' and why it's a good idea?  

Of course 'infinite banking' violates my primary rule of buying anything:

Never buy any financial product advertised on AM talk radio.

What's funny is that that while those people talking about how wonderful it is, why is it that they are having to sell it?  If it really generated risk free returns, big money hedge fund investors would actually pay people to take out the policies in exchange for a cut of the action.  That does not happen.  No secondary market for channeling capital into these products.  There are markets for lending people money to buy discounted employee stock purchase plans, frequent flier miles, credit card authorized users, etc.  But somehow a product that is 'risk free' and much higher than bonds seem to have no one trying to round up people to take out policies for their money.  

Rotate Log in or sign up to reply
user profile avatar
Check Rosette Top Subject:
Taxes & Accounting
  • Posts 132
  • Votes 104

Greg O'Brien
Accountant from Boston, MA

replied 6 months ago

@Michael Zagorsky what I found helpful was doing independent, unbiased research, outside of insurance salesmen, because yes, they may see this as ideal for you or anyone else.  Talk to other who are 10-15 years into it.  I would never look at this as in investment strategy, because its not.  

I guess I already understood certain parts of the IRC that it interplays with and the benefits, but they aren't primary. However, those 5 things you listed are apples and oranges to IBanking, especially #5. Not to digress, but some of the worst advice I hear is when someone is told just to tax their LLC as an S Corp. Makes me cringe if they don't have an entry and exit plan, not understand the complexities they've now created. Lazy CPA advice. The number of people that have shown up with real estate in an S corp is mind boggling. Also, in the other examples, if they market crashes, isn't your money at risk? Some would prefer a % of funds in a mutual company that guarantees a return with no "dips" because of factors outside of their control.

I don't think anyone goes into Ibanking primarily for tax advantages.  The Rockefeller's or Mcdonald's did not do it purely for tax advantages, although its a bonus. They did it as a way to remove their cash from the primary banking channels and into a strategy where they can deploy capital on their own terms.

As others have said, I really don't think this is for everyone.  My personal opinion is that it should be reserved for business owners with excess cash flow with a high degree of certainty they'll have that cash flow for years to come.  Insurance people may not agree with that, but that's who I think benefits the most.

Rotate Log in or sign up to reply
user profile avatar
  • Posts 4
  • Votes 2

Barry Brooksby
Investor from St. George, UT

replied 2 months ago

I own multiple Infinite Banking policies and use them for RE investing. It works. You can get tax free growth at 4% or higher and the availability to borrow against the policy at 90% or greater of the value. You can learn more about coordinating RE with Infinite Banking here,

Rotate Log in or sign up to reply
  • 1
Related Resources Personal Finance Forum
Will Americans’ Personal Finances Survive the Pandemic?
9 Ways to Save Money You Have Probably Never Tried
8 Ways to Maximize Your 2020 Tax Benefits as a Real Estate Investor
How Much Should You Save for Retirement?
If 2020 Taught Us Anything About Money, It’s the Importance of THIS
Resources Read, see, and learn more!
Link Real Estate Investment Calculators
Link BiggerPockets Blog
Link Path to Purchase
Link Mortgage Loans
Link Find a Contractor
Link Real Estate Agents
Link Hard Money Lenders
Link Real Estate Listings

Top Contributors

John Perrings
John Perrings
Oakland, CA
9.29
Score
Thomas Rutkowski
Thomas Rutkowski
Boynton Beach, FL
5.29
Score
Russell R.
Russell R.
Mt Kisco, NY
4.14
Score
Jason Wray
Jason Wray
Nationwide (Florida)
4.0
Score
Bill Hampton
Bill Hampton
Atlanta, GA
3.43
Score
Log in Sign up

Log in

Forgot password?

If you signed up for BiggerPockets via Facebook, you can log in with just one click!

Log in with Facebook

Or
btn_google_dark_normal_ios Created with Sketch. Continue with Google

Let's get started

We just need a few details to get you set up and ready to go!

Use your real name

Use at least 8 characters. Using a phrase of random words (like: paper Dog team blue) is secure and easy to remember.

By signing up, you indicate that you agree to the BiggerPockets Terms & Conditions.

Or
btn_google_dark_normal_ios Created with Sketch. Continue with Google

Why create an account?

Receive a free digital download of The Ultimate Beginner's Guide to Real Estate Investing.

Connect with 1,000,000+ real estate investors!

Find local real estate meetups and events in your area.

Start analyzing real estate properties, we do the math for you.

It's free!

Explore

  • Membership
  • Community
  • Education
  • Marketplace
  • Tools
  • FilePlace
  • REI Resources
  • Perks
  • Glossary
  • Reviews
  • iOS App
  • Android App

Company

  • About Us
  • Press
  • Advertising
  • Careers
  • Stats
  • Contact Us

Important

  • Editorial Guidelines
  • Terms of Use
  • Rules
  • Privacy
  • FAQ

Social

  • Facebook
  • Twitter
  • YouTube
  • Instagram
© 2004-2021 BiggerPockets, LLC. All Rights Reserved.