Term vs Whole Life Insurance (detailed tabular values and more)

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Term vs Whole Life Insurance (detailed tabular values and more)

David Lewis
Durham, NC · Member since 2016 · 45 posts · 12 votes

Do you want to know more about whole life insurance, and how it compares to other investment/savings strategies? Want to see if whole life insurance makes sense IN ADDITION to real estate investing? Have questions about all of this?

This thread is for you. 

Lots of people have asked to see numbers and details about whole life insurance in other threads. No one has done a "deep dive" into whole life insurance, so I thought I'd do it. 


This information is extracted from a larger analysis I did on the topic. Some additional details:

Total annual outlay in both scenarios starts with $12,037 (this is from my own personal policy which is why the numbers are not exact. In other words, this is a real life example, not a hypothetical). 

Whole life insurance consists of base whole life + term insurance blend. Maximum additional paid up life insurance elected at policy issue. Custom report generated showing internal costs on whole life insurance, including annual costs and cost per $1,000 of insurance + CV. IRR on CV and DB also included:

Buy Term and invest the difference, with calculated annual costs and equivalent cost per $1,000 term + savings/investment. I adjusted the tabular values below to reflect a tax-deductible/pretax contribution, pushing the total outlay higher on this analysis. 

Average retirement account costs are pulled from the 401(k) Averages Book. The compounding interest rate mirrors the dividend interest rate for the illustrated whole life policy above. IRR on BTID CV + DB also included:

Calculated income:

Tax-free income draw from whole life insurance policy at age 65, 70, and age 75. Annuitization of cash value, reduced paid up insurance to keep policy in-force:

@ Age 65: $5,032/month

@ Age 70: $8,033/month

@Age 75: $13,085/month


Now for the BTID (BTSD) strategy:

@ Age 65: $5,155/month

@ Age 70: $7,861/month

@Age 75: $10,179/month

The maximum income from the whole life policy and BTID/BTSD strategy is about the same at age 65, but the whole life plan absolutely crushes the amount I could have withdrawn from a qualified retirement plan, like a 401(k) or IRA at age 70 and beyond. Also, I adjusted these figures to account for the RMD withdrawals at age 70 1/2.

*****

Infinite Banking/Circle of Wealth/Bank On Yourself/etc.

Some people want to know about the effect of taking loans against whole life insurance and repaying them with interest, thus creating your own personal financing system, which goes by a variety of different marketing names. 

I did not include a loan example in this analysis. However, the math isn't difficult. Any loan you want to take against the whole life policy is secured with the policy values, which are restored when the loan is paid off.

In other words, it's a secured loan at a very low rate of interest. 

The loan is given by the insurer at a current rate of 5%, and the cash value continues to grow as though no loan is taken against the policy. As interest is repaid on the loan, the insurer turns around and credits part of this to the policy's cash value. Dividends are paid as normal.

This analysis used a policy I own which allows non-direct recognition of policy loans.

When repaying policy loans, there is some additional "wiggle room" to allocate part of the repayment towards the purchase of additional paid up insurance, thus increasing policy values beyond these illustrated rates.

This is the "banking" aspect of this strategy. It is done because banks and brokerage firms do not offer these types of loan deals or terms.

*****


Hope this helps. The full analysis, and more details, are available on my website, which I am apparently not allowed to post here. But, if you're savvy, you'll find it somehow if you really need more information. :)

Thanks, and post up your questions below!


P.S. Trolls will be ignored.

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Dmitriy Fomichenko
Solo 401k Expert · Anaheim Hills, CA · Member since 2012 · 18k+ posts · 6k+ votes
10y

1. Whole life insurance is a rip-off! Most people would be far better off getting the cheapest term insurance to protect their families and invest the difference into assets they can control and understand the best such as real estate or private lending. 

2. What you posted here David looks more like a blog post not a forum post. 

BP is a wrong place for you trying to promote your scheme. People are getting ripped off daily with the insurance products that you are selling, but majority of folks here are intelligent enough to realize that they are much better off taking control of their investments into their own hands, rather than giving their hard earned money to the insurance companies which pay their sales agents commissions up to 90% of the premium received. 

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  • Dmitriy Fomichenko
    Solo 401k Expert · Anaheim Hills, CA · Member since 2012 · 18k+ posts · 6k+ votes
    10y

    1. Whole life insurance is a rip-off! Most people would be far better off getting the cheapest term insurance to protect their families and invest the difference into assets they can control and understand the best such as real estate or private lending. 

    2. What you posted here David looks more like a blog post not a forum post. 

    BP is a wrong place for you trying to promote your scheme. People are getting ripped off daily with the insurance products that you are selling, but majority of folks here are intelligent enough to realize that they are much better off taking control of their investments into their own hands, rather than giving their hard earned money to the insurance companies which pay their sales agents commissions up to 90% of the premium received. 

    9Reply
  • Thomas RutkowskiPro Member
    Financial Advisor · Boynton Beach, FL · Member since 2015 · 833 posts · 798 votes
    10y
    Originally posted by @Dmitriy Fomichenko:

    1. Whole life insurance is a rip-off! Most people would be far better off getting the cheapest term insurance to protect their families and invest the difference into assets they can control and understand the best such as real estate or private lending. 

    2. What you posted here David looks more like a blog post not a forum post. 

    BP is a wrong place for you trying to promote your scheme. People are getting ripped off daily with the insurance products that you are selling, but majority of folks here are intelligent enough to realize that they are much better off taking control of their investments into their own hands, rather than giving their hard earned money to the insurance companies which pay their sales agents commissions up to 90% of the premium received. 

    Prove it. Don't just come on here posting nonsense without backing it up. A properly designed, and funded life insurance policy will allow an investor make more money by leveraging their cash value. I see you are supposedly a 401k expert. I'll put this strategy against a self directed IRA any day. I have both and I have the exact same investments in each strategy.

    I don't think you know enough about insurance to make such claims. Its not about life insurance versus real estate. Its about using the leverage to enhance the returns on the exact same real estate investments.

    1Reply
  • Dmitriy Fomichenko
    Solo 401k Expert · Anaheim Hills, CA · Member since 2012 · 18k+ posts · 6k+ votes
    10y

    @Thomas Rutkowski

    I don't need to prove facts, like I said most people here are intelligent enough to do their own research and make educated decision that cash value life insurance is not for them.

    The reason you are defending this strategy because you too are making up to 90% commissions on the sale of this scheme. 

    You and David are the ones who need to prove your point. But you can't. All you can do is to use projected, non-guaranteed values in your sales illustrations, which don't prove anything. I don't need to prove anything 'cause I'm not trying to sell anything. You guys are. All I'm doing is trying to warn the readers to beware and do their due diligence and not rely on bogus claims made by the insurance sales agents.

    I do know a little about life insurance, I was in the life insurance business and still keep my license active. But my conscience would not allow me to sell any cash-value life insurance products knowing that it would not be beneficial to them regardless of the high commission potential. 

    You can use fancy words such as 'using leverage to enhance returns' etc. all day long, but the fact remains: if as a client I loose 50% of my premiums to commissions and fees I don't care what kind of leverage I gain as a result, it would practically be impossible to recover my losses. 

    3Reply
  • David Lewis
    OP
    Durham, NC · Member since 2016 · 45 posts · 12 votes
    10y

    "What about commissions on whole life?"

    The commissions on a blended whole life insurance, such as the one I presented above, are very low. I calculated the commission on my own policy at 7.3% of the total premium amount. That is $74ish per $1,000 of premium. Commissions on a typical client policy range from between 7% to 10% of total premium.

    This is significantly less than even term insurance. It's actually less than any commissionable mutual fund since this commission is payable only in the first year, not subsequent years as is the case with the majority of equity investments.

    The 90% commission payout is based off from a life paid up at age 100 or age 95 where there is no term insurance blending or paid up additional insurance being added.

    If I were to strip out the paid up insurance and term blending on this policy, the base commission would still only be 30% of the premium, but I reduced it further to increase cash value.

    This particular policy is now one year old and is expected to exceed the non-guaranteed illustrated rate I originally ran before taking out insurance on my life, due in part to the fact that I employed the banking process in the first year.

    0Reply
  • Dmitriy Fomichenko
    Solo 401k Expert · Anaheim Hills, CA · Member since 2012 · 18k+ posts · 6k+ votes
    10y

    Not very convincing... Independent third party research says that "Although every company is different, on average life insurance agents make about a 30-70% commission on term life insurance and around 90-105% commission on whole life products. Keep in mind that this is the first year commission on the premium and subsequent year commissions are much lower with an average of 6% per year for whole".

    Just one of many sources: http://personalinsure.about.com/od/life/f/lifefaq3...

    0Reply
  • Thomas RutkowskiPro Member
    Financial Advisor · Boynton Beach, FL · Member since 2015 · 833 posts · 798 votes
    10y

    If he's relying on national statistics on commissions, he clearly has no experience with insurance and especially not with high cash value case designs. He clearly didn't read either of our posts or he would know that we're not relying on projections for a leverage model to work. 

    A high cash value policy has cash value on day 1. A lot of cash value... like up to 85% of the premium. So please tell me where I'm making 100% commissions Mr Insurance pro. Since the death benefit is minimized, the commissions are drastically reduced to the benefit of the policy owner. 

    This guy knows enough about insurance to be dangerous which he is demonstrating with his poorly informed advice to readers. 

    1Reply
  • Bob Thompson
    Investor · Columbus, GA · Member since 2015 · 6 posts · 1 vote
    10y

    I have found this discussion interesting. I am actually using this plan to finance my most recent acquisition and paid for the house with cash. Here is the simplest point I want to make. I borrow the cash value of my policy to pay cash for a house. I have to pay the insurance company 5% simple interest on the loan. I actually NEVER have to pay the loan back if I don't want to, the amount would be deducted from the payoff to the beneficiary. Here is the kicker, I can choose to pay back more than the 5% and grow my pot of money. If and when I pay my loan off I have all that money to invest. THE GREAT THING is that my policy earns a guaranteed amount of the whole amount of my cash value like I have never taken a loan against the policy. It would be stupid for me to go into my saving and pay cash for my house because I would be giving the bank a bunch of money that i could be paying myself. Typical whole life policies are not a good deal but the policies used in "Bank on Yourself" programs are very different and so many folks are clueless. These policies have a generational effect that most of us have never considered. Read Pamela Yellen's Book - Bank of Yourself and R. Nelson Nash's book - Becoming your own Banker. Most people don't have a clue of the power of this program. When I took my loan from my plan, I decided to pay 10% interest on the loan which allows 5% to go back into my cash build up and increase the money that I have or my heirs have in the future. I NEVER pay tax on this money afterward and neither do my heirs as it will be a death benefit to them.

    Do your own research and I believe you will find the Bank on Yourself method to be one of the best ways to Finance your realestate deals in the future and coupled with a self-directed Roth Realestate IRA how can you go wrong. Just don't wait until your health age affect your premiums. I am not an insurance person or finance person. I just know that this system works for me to help me build and meet my real estate goals.

    1Reply
  • Derek Lacy
    Insurance Agent · Maitland, FL · Member since 2015 · 397 posts · 244 votes
    10y
    Dmitriy Fomichenko Thomas Rutkowski I am not a huge proponent of infinite banking, have I set up such plans, yes, but I find a very narrow suitability for them. What I mean is one needs to have extra assets to invest, in my opinion. But those numbers are completely false, at our agency, which is now over $2 Billion in premium written, per insurance journals' August 2015 rankings, and the fact that I deal in commission negotiations with I insurers I can say those commissions quoted are completely backwards. And you are not giving credit for the fact that an agent can negotiate down commissions or that excess contributions are commissioned at a lower level. Most term insurers pay 1st year, 90-120% of premium, 13 month look back. Most WL/UL insurers pay 1st year, 40-60% of "target" premium, 13 month look back. Excess contribution about 2-5%. Since infinite banking concept is based fully in excess contributions. That means on the $12,000 above amount, without seeing the contract I would assume the agent is getting about 10-15% commission. So about $1500 in commission. Vs term for a similar death benefit might pay $350. Do not get me wrong, I am hear to see good information presented, and I absolutely feel Thomas paints a rose colored picture, but he is not a liar. I agree that infinite banking can happen. I had an old WL my parents bought that I have used for that purpose. But one needs assets and a time horizon to make it work. I believe the data above shows that one needs 3-5 years time to make it work. Tom, feel free to disagree, but I think it's a matter of opinion on what "makes it work." Dmitriy I am just unsure where that report got their numbers.
    0Reply
  • Thomas RutkowskiPro Member
    Financial Advisor · Boynton Beach, FL · Member since 2015 · 833 posts · 798 votes
    10y
    Originally posted by @Derek Lacy:

    Dmitriy Fomichenko Thomas Rutkowski

    I am not a huge proponent of infinite banking, have I set up such plans, yes, but I find a very narrow suitability for them. What I mean is one needs to have extra assets to invest, in my opinion.

    But those numbers are completely false, at our agency, which is now over $2 Billion in premium written, per insurance journals' August 2015 rankings, and the fact that I deal in commission negotiations with I insurers I can say those commissions quoted are completely backwards. And you are not giving credit for the fact that an agent can negotiate down commissions or that excess contributions are commissioned at a lower level.

    Most term insurers pay 1st year, 90-120% of premium, 13 month look back.

    Most WL/UL insurers pay 1st year, 40-60% of "target" premium, 13 month look back. Excess contribution about 2-5%.

    Since infinite banking concept is based fully in excess contributions. That means on the $12,000 above amount, without seeing the contract I would assume the agent is getting about 10-15% commission. So about $1500 in commission. Vs term for a similar death benefit might pay $350.

    Do not get me wrong, I am hear to see good information presented, and I absolutely feel Thomas paints a rose colored picture, but he is not a liar. I agree that infinite banking can happen. I had an old WL my parents bought that I have used for that purpose. But one needs assets and a time horizon to make it work.

    I believe the data above shows that one needs 3-5 years time to make it work. Tom, feel free to disagree, but I think it's a matter of opinion on what "makes it work."

    Dmitriy I am just unsure where that report got their numbers.

     Derek, just run an illustration for a 5-pay. Minimum death benefit/maximum cash value. For whatever carrier you write, back out there dividend by dividing the first year illustrated cash value by 1 plus the dividend rate. That is the starting cash value on the account. There are no rose colored assumptions here. That is the wrong cash value before any growth is applied. For this to work, the policy has to use a non-direct recognition loan so that the money is literally working into places at one time.

    Now that you are at this point, you can put in any assumptions you want to test the model. It works!

    Remember, even in a 5-pay, the investor still has the other 4/5 of his "working cash" that they can be investing. Each year they will roll it into life insurance premium to continue building up the bank. The investor will start off a little in the hole because of the 15% "loss" but the accelerated growth from having their money working in two places at one time will make up for it in short order. 

    Feel free to contact me directly, I'd be happy to show you exactly what I'm doing and why this works.  I don't consider what I do to be "infinite banking". I simply show investors how they can put their money to work in two places at one time. The infinite banking folks make it way more complicated than it needs to be.

    0Reply
  • David Lewis
    OP
    Durham, NC · Member since 2016 · 45 posts · 12 votes
    10y
    Originally posted by @Derek Lacy:

    Dmitriy Fomichenko Thomas Rutkowski

    I am not a huge proponent of infinite banking, have I set up such plans, yes, but I find a very narrow suitability for them. What I mean is one needs to have extra assets to invest, in my opinion.

    But those numbers are completely false, at our agency, which is now over $2 Billion in premium written, per insurance journals' August 2015 rankings, and the fact that I deal in commission negotiations with I insurers I can say those commissions quoted are completely backwards. And you are not giving credit for the fact that an agent can negotiate down commissions or that excess contributions are commissioned at a lower level.

    Most term insurers pay 1st year, 90-120% of premium, 13 month look back.

    Most WL/UL insurers pay 1st year, 40-60% of "target" premium, 13 month look back. Excess contribution about 2-5%.

    Since infinite banking concept is based fully in excess contributions. That means on the $12,000 above amount, without seeing the contract I would assume the agent is getting about 10-15% commission. So about $1500 in commission. Vs term for a similar death benefit might pay $350.

    Do not get me wrong, I am hear to see good information presented, and I absolutely feel Thomas paints a rose colored picture, but he is not a liar. I agree that infinite banking can happen. I had an old WL my parents bought that I have used for that purpose. But one needs assets and a time horizon to make it work.

    I believe the data above shows that one needs 3-5 years time to make it work. Tom, feel free to disagree, but I think it's a matter of opinion on what "makes it work."

    Dmitriy I am just unsure where that report got their numbers.

    Hey Derek,

    Not sure if you missed my earlier post, but my commissions on the above are roughly 7-8% of the total premium. You are absolutely right about the lower commission percentages. Typically, I see 30% on these policies for the base premium because it's a 10-pay whole life, which already carries a lower commission. On top of that, the term insurance that's blended into the policy pays a few percent and the paid up additional insurance is only commissionable at 3%. 

    Not sure why you see narrow suitability for it (perhaps we're in different markets). I find it very suitable for all my clients, but then I restrict my market and do a good job qualifying beforehand so people self-select. Most people for whom this isn't suitable filter themselves out. 

    What I've discovered over the last 10 years is that people need:

    1) a high savings potential and;
    2) the psychology of a saver.

    If they've got #2 but are a little lacking in #1, then financial planning is in order. 

    0Reply
  • David Lewis
    OP
    Durham, NC · Member since 2016 · 45 posts · 12 votes
    10y
    Originally posted by @Thomas Rutkowski:

     For this to work, the policy has to use a non-direct recognition loan so that the money is literally working into places at one time.

    You don't need to have non-direct recognition (NDR) to make this work. The IBC folks say you do (not sure why). What you need (if your carrier uses direct recognition (DR)) is an alternate dividend scale that is either the same or higher than the non-DR one.

    Or, you need a small spread and the ability to juice the PUAs. Penn Mutual comes to mind (they actually have 2 different paid up additions riders). They underwrite their APPUAR differently than most and even though their loans are DR on whole life, their APPUAR is very very flexible so you can make up the spread pretty easily. Good for people who don't want to use variable loans or whose income is highly variable since Penn allows you to stop and start (or vary) the paid up additions inside of 5-year blocks/windows.

    You can also go reduced paid-up in any year beyond (I think) the 5th year. 

    0Reply
  • Dmitriy Fomichenko
    Solo 401k Expert · Anaheim Hills, CA · Member since 2012 · 18k+ posts · 6k+ votes
    10y

    @Thomas Rutkowski

    I don't think you are going to gain much popularity or business by personally attacking me. I addressed you by name and you addressing me as a third party "he". If you wish to have a public discussion - respect others.

    I asked you and David to provide proof that the scheme you are promoting works just as you describe it and makes sense for most people. And what you do in return? Call me names "Mr Insurance pro", very disrespectful!

    I never claimed to be an insurance expert. I said that I was in the insurance business but my expertise are self-directed 401K & IRA.

    Just provide proof to me and to the readers that what you promote works. Not some confusing illustration that has no facts in it and only projected returns. If what you do is so good bring in your happy clients who followed your suggestions so they can share with us their actual experience and returns. 

    I engages in hundreds of discussions here on the BP forum on the subject of self-directed investing (which is area of my expertise) and almost all of them people are asking questions, want to learn more, etc. I don't remember 'fighting' with someone who thinks self-directed Solo 401k or self-directed IRA are bad. And if cash value life insurance is so good for everybody, why there is so much opposition in the forum discussion???

    0Reply
  • Mark Nolan
    Professional · Carlsbad, CA · Member since 2012 · 12k+ posts · 1k+ votes
    10y

    @David Lewis 

    Are you saying that I can use Whole Life Insurance to leverage some of my self-directed IRA real-estate holdings?

    0Reply
  • David Lewis
    OP
    Durham, NC · Member since 2016 · 45 posts · 12 votes
    10y
    Originally posted by @Mark Nolan:

    @David Lewis 

    Are you saying that I can use Whole Life Insurance to leverage some of my self-directed IRA real-estate holdings?

     No, I'm not saying that. 

    But, since you asked, you might be able to do it and avoid the self-dealing rules as long as  the paper trail is there. 

    Earned income goes into your IRA (as normal). A loan is taken against the policy to replace that income or to do something else that you want to do anyway.

    Said loan is repaid at a suitable interest rate. 

    Since money is fungible, the effect is the same as if you had used policy loan proceeds directly for that purpose. I'm not entirely sure how the IRS looks at this as self-dealing can be not so black and white in a situation like this. 

    0Reply
  • David Lewis
    OP
    Durham, NC · Member since 2016 · 45 posts · 12 votes
    10y
    Originally posted by @Dmitriy Fomichenko:

    @Thomas Rutkowski

    I don't think you are going to gain much popularity or business by personally attacking me. I addressed you by name and you addressing me as a third party "he". If you wish to have a public discussion - respect others.

    I asked you and David to provide proof that the scheme you are promoting works just as you describe it and makes sense for most people. And what you do in return? Call me names "Mr Insurance pro", very disrespectful!

    I never claimed to be an insurance expert. I said that I was in the insurance business but my expertise are self-directed 401K & IRA.

    Just provide proof to me and to the readers that what you promote works. Not some confusing illustration that has no facts in it and only projected returns. If what you do is so good bring in your happy clients who followed your suggestions so they can share with us their actual experience and returns. 

    I engages in hundreds of discussions here on the BP forum on the subject of self-directed investing (which is area of my expertise) and almost all of them people are asking questions, want to learn more, etc. I don't remember 'fighting' with someone who thinks self-directed Solo 401k or self-directed IRA are bad. And if cash value life insurance is so good for everybody, why there is so much opposition in the forum discussion???

    @Dmitriy, Hey, chill out. 

    First of all, I went into a lot of detail in those spreadsheets, which details what all the numbers mean. It's a hypothetical illustration which shows how something works (if this, then that). 

    It's not a "scheme". It's a legitimate and legal financial contract. I know it's not very popular with stock jockeys and mutual fund guys, but you'll just have to get over it. No, it's not for everyone. I'm not saying everyone should buy it. 

    And, this is no different from any other financial product or strategy. You can't see into the future anymore than I can. At the same time, my policy is actually performing as expected. That's the proof, as it were. 

    The policy is from MassMutual. You can see Mass' declared dividend interest rate in this year's press release. It's 7.1%, just as illustrated here.

    You do a lot of questioning about the commission structure, IRR of the policy, etc. but you don't seem to really understand how this particular policy design works. I invite you to carefully re-read what I've written above.

    It's not magic. Just good money management on the part of the insurer. 

    Finally, lots of people like using whole life for a variety of purposes, including leveraging to buy real estate. They're not all here in this thread (some of them were in the other thread that got all messed up). But, they're out there. 

    0Reply
  • Dmitriy Fomichenko
    Solo 401k Expert · Anaheim Hills, CA · Member since 2012 · 18k+ posts · 6k+ votes
    10y

    David,

    your words are just that - your words, they are not proving anything. And I only see one other forum post that you have participated in with bunch of people opposing this legitimate scheme.

    0Reply
  • Mark Ferguson
    Flipper/Rehabber · Greeley, CO · Member since 2013 · 2k+ posts · 1k+ votes
    10y
    Originally posted by @David Lewis:

    Do you want to know more about whole life insurance, and how it compares to other investment/savings strategies? Want to see if whole life insurance makes sense IN ADDITION to real estate investing? Have questions about all of this?

    This thread is for you. 

    Lots of people have asked to see numbers and details about whole life insurance in other threads. No one has done a "deep dive" into whole life insurance, so I thought I'd do it. 


    This information is extracted from a larger analysis I did on the topic. Some additional details:

    Total annual outlay in both scenarios starts with $12,037 (this is from my own personal policy which is why the numbers are not exact. In other words, this is a real life example, not a hypothetical). 

    Whole life insurance consists of base whole life + term insurance blend. Maximum additional paid up life insurance elected at policy issue. Custom report generated showing internal costs on whole life insurance, including annual costs and cost per $1,000 of insurance + CV. IRR on CV and DB also included:

    Buy Term and invest the difference, with calculated annual costs and equivalent cost per $1,000 term + savings/investment. I adjusted the tabular values below to reflect a tax-deductible/pretax contribution, pushing the total outlay higher on this analysis. 

    Average retirement account costs are pulled from the 401(k) Averages Book. The compounding interest rate mirrors the dividend interest rate for the illustrated whole life policy above. IRR on BTID CV + DB also included:

    Calculated income:

    Tax-free income draw from whole life insurance policy at age 65, 70, and age 75. Annuitization of cash value, reduced paid up insurance to keep policy in-force:

    @ Age 65: $5,032/month

    @ Age 70: $8,033/month

    @Age 75: $13,085/month


    Now for the BTID (BTSD) strategy:

    @ Age 65: $5,155/month

    @ Age 70: $7,861/month

    @Age 75: $10,179/month

    The maximum income from the whole life policy and BTID/BTSD strategy is about the same at age 65, but the whole life plan absolutely crushes the amount I could have withdrawn from a qualified retirement plan, like a 401(k) or IRA at age 70 and beyond. Also, I adjusted these figures to account for the RMD withdrawals at age 70 1/2.

    *****

    Infinite Banking/Circle of Wealth/Bank On Yourself/etc.

    Some people want to know about the effect of taking loans against whole life insurance and repaying them with interest, thus creating your own personal financing system, which goes by a variety of different marketing names. 

    I did not include a loan example in this analysis. However, the math isn't difficult. Any loan you want to take against the whole life policy is secured with the policy values, which are restored when the loan is paid off.

    In other words, it's a secured loan at a very low rate of interest. 

    The loan is given by the insurer at a current rate of 5%, and the cash value continues to grow as though no loan is taken against the policy. As interest is repaid on the loan, the insurer turns around and credits part of this to the policy's cash value. Dividends are paid as normal.

    This analysis used a policy I own which allows non-direct recognition of policy loans.

    When repaying policy loans, there is some additional "wiggle room" to allocate part of the repayment towards the purchase of additional paid up insurance, thus increasing policy values beyond these illustrated rates.

    This is the "banking" aspect of this strategy. It is done because banks and brokerage firms do not offer these types of loan deals or terms.

    *****


    Hope this helps. The full analysis, and more details, are available on my website, which I am apparently not allowed to post here. But, if you're savvy, you'll find it somehow if you really need more information. :)

    Thanks, and post up your questions below!


    P.S. Trolls will be ignored.

    0Reply
  • David Lewis
    OP
    Durham, NC · Member since 2016 · 45 posts · 12 votes
    10y

    Did you have a question Mark (no pun intended)? If so, it didn't show up when you quoted the original post. 

    0Reply
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