All Forum Posts by: John Perrings

 I do IBC myself and help others set it up in their lives every day. So I guess you could say I’m a big fan 🙂

It's not an either/or discussion. Life insurance is just another asset class. That means it's not an investment and shouldn't be compared to an investment. Having both investments and insurance is completely reasonable as part of an overall strategy.

Just like having investments and real estate is completely reasonable.

Having both investments and insurance will generally create better distribution outcomes in the future than either one can do by themselves.

Qualified plan money cannot be rolled into life insurance. You’d have to liquidate, pay the taxes and penalties, and pay life premiums with the after-tax money. 

In addition to this, there are also some practical issues with trying to move a large lump sums into life insurance. The IRS rules around life insurance cash value create some significant tradeoffs. It’s possible but will require some time.

Maybe consider rolling into a self-directed IRA. That would give you more control over what you can invest in.

@Chris Yeung

It really depends on the policy. Oftentimes, premium payments will increase both cash value and death benefit.

I’m not following your second question. If premium payments increase your cash value, I’d want to pay as much in premium as I could. :)

Everything depends on how the policy is set up and the rest of your financial picture.

It could make sense to pay as much premium as you can to build the cash value. 

I would get in touch with an agent to discuss your options.

Yes, it's a great way to strategically accumulate and deploy capital.

Read the book, Becoming Your Own Banker by Nelson Nash. It's the source material for The Infinite Banking Concept®. 👍

"Saving money" means storing money in a place where:

1. You won't lose any of it by keeping it there and;
2. You can get to it when you want it

This makes things like brokerage accounts, qualified plans, lines of credit, etc., definitively not savings vehicles.

People have been taught to use these products because of the fact that your money can't earn anything sitting in a bank account, which is true.

But what if you could get respectable growth on your cash without giving up guarantees and liquidity?

Enter cash value whole life insurance.

A bedrock financial tool that's been around for centuries and grows by orders of magnitude over that of a bank. Whole life insurance is guaranteed, has creditor protection, offers safe leverage, and can create incredible tax strategies later on when you want to sell assets.

A perfect place to store cash.

My advice is to look at this with a long-term mindset and not get caught up in the noise about cash value ratios and break-even points. There are no deals in the insurance business and any policy design trait has a corresponding tradeoff.

Two primary points for building capital using life insurance:

1. You'll have a liquidity gap in the first several years of the policy, meaning you won't have as much cash value as what you've paid in premium. This can create an early delay in buying assets. The delay is very temporary, but this is the hardest thing for many real estate folks to get past.

2. Once you close the liquidity gap, the cash value of the policy will turn into a liquidity rocket engine. At that point, every dollar you pay in premium will start to create $2, $3, $4 in cash value. The longer you can pay a premium, the better it gets. You'll more than make up for the short delay in the early years.

If you can look past the first few years, you'll have a cash creation engine that will perform for the next 50.

 To save you some time regarding life insurance - it is not ideal to try and fund a large lump sum of money into a policy. Doing so would likely turn the policy into a modified endowment contract (MEC) and make the policy taxable, creating a double-taxation: once upon liquidating the retirement account, and again in the new policy because of the MEC limits.

If the property in TN is an investment property, he could look at doing it the other way: liquidate -> buy rental property -> use net income to buy life insurance.

@Account Closed - yes, you have the jist of it. Whole life allows you to strategically accumulate your own capital so you don't have to raise as much.

Timing for when you borrow depends on the carrier, but in general, you can borrow immediately.

Downsides are less than 100% of what you've paid in premium is available as cash value in the first few to several years of the policy, depending on your policy design, age, and health. First year liquidity is typically 50%-90% for a policy designed for early cash value, depending on previously mentioned factors.

This "downside" in the early years reverses and becomes an "upside" in later years. Every premium payment creates cash value higher than 100% of the premium.