21 Reasons Life Insurance Policy Owners Love the Policy Loan Feature

We recently published a 3-article blog post series inspired by an article that financial planner and investment advisor Michael Kitces wrote about the problems with “banking on yourself” with life insurance policy loans.

Then we invited our readers to tell us what their biggest take-away from these articles was, and to share their personal experience with Bank On Yourself policy loans versus other sources of financing.

The many comments left on these three blog posts demonstrated once again how insightful and articulate our readers are! We’ve published excerpts from some of the comments we received below, where you’ll find 21 reasons why using a Bank On Yourself-type policy loan to access cash beats any other way of accessing capital!

In the first article, we discuss four things Mr. Kitces got right about the Bank On Yourself concept, and then reveal what he got wrong, including five fundamental concepts.

Check out What Michael Kitces Missed in His Bank On Yourself Review, Part 1. [Read more…]

The 8th Wonder of the World? Here’s proof

Recently we “ethically bribed” our readers into learning more about what I’ve called the “8th Wonder of the World.”

You see, the two most common reasons people have for adding the Bank On Yourself method to their financial plan are:

  1. To grow wealth safely and predictably every year – no matter what’s happening in the market or the economy – and to protect themselves from losses in future market crashes
  2. To become their own source of financing when they want to make a major purchase or when an emergency expense comes up – so they can get access to money when they need it and for whatever they want – no questions asked

The second reason – the ability to become your own “banker” – is so compelling that once people use that feature of their Bank On Yourself plan, they often write to tell us what a powerful and emancipating feeling it is. [Read more…]

Michael Kitces’ Big Blind Spot on Bank On Yourself Policy Loans

In his review of Bank On Yourself, Michael Kitces repeatedly harped on the worst-case scenario of a life insurance policy owner taking out a life insurance loan with no regard for ever paying it back.

Kitces rightly pointed out there could be significant tax consequences if a life insurance policy were to lapse due to a large policy loan.

If the interest is not paid, it gets added to the loan balance. Eventually the loan balance could come so close to the cash value securing the loan that the life insurance company—after giving fair warning—would take the cash value to pay off the loan, causing the policy to lapse.

What Kitces didn’t mention is that if the loan balance ever does exceed the available cash value, paying some or all of the loan interest out of pocket generally solves the problem. And he didn’t tell you about the option of taking a policy “reduced paid-up,” as I discussed in our previous article on this topic.

So, we agree with Michael Kitces that a growing loan can cause a life insurance policy to lapse.

But Kitces mostly talks about “when the policy lapses.” Huh? “When”? That’s an odd assumption. It’s like saying, “Don’t take out a mortgage to buy a home, because when you default on your loan …”

Does he really think we are that irresponsible? [Read more…]

Here’s What Michael Kitces Missed in His Bank On Yourself Review, Part 2

In part 1 of this article, I explained that financial planner and investment advisor Michael Kitces wrote a review of the Bank On Yourself concept that redefined my trademarked phrase, “Bank On Yourself” to fit his interpretation of how the concept works.

Now I’ll show you how Kitces missed five critical key requirements of the Bank On Yourself concept—and why it’s so important that you don’t make the same mistake.

To review, to truly be banking on yourself

  1. You must use a dividend-paying whole life insurance policy
  2. The policy must have a “non-direct recognition” policy loan feature
  3. The policy must incorporate a flexible policy design
  4. You, as the policy owner, must be an “honest banker”
  5. You must work with a knowledgeable advisor

Let’s See How Michael Kitces Misunderstood—or Simply Missed—Each of These Five Requirements of Bank On Yourself:

1. You must use a dividend-paying whole life insurance policy

[Read more…]

Here’s What Michael Kitces Missed in His Bank On Yourself Review, Part 1

Financial planner and investment advisor Michael Kitces understands a lot about many areas of money and finance. He has been to school. He has twice as many letters after his name as he has in his name. Literally.

Surprisingly, Kitces does not understand some basic fundamentals of the Bank On Yourself strategy for personal finance.

Kitces wrote a review of the Bank On Yourself concept. And while he got some of the fundamentals right, he missed some very important points.

From time to time, readers ask us about Kitces’ article, so I want to clear up the misconceptions in it. I’ll cover four things he got right about the Bank On Yourself strategy, then I’ll reveal the things Kitces got wrong—including five fundamental concepts.

Here’s What Michael Kitces Got Right in His Bank On Yourself Review …

In his Bank On Yourself review, Michael Kitces correctly stated four things:

1. Kitces: Permanent life insurance “gives an insurance company the means to provide policy owners a personal loan at favorable interest rates, because the cash value provides collateral for the loan”

Well stated! You can’t take out a life insurance policy loan unless you have a life insurance policy with enough cash value to serve as collateral for the loan. And the interest charged for policy loans is generally at competitive, below-market rates.

2. Kitces: “Even as cash value life insurance operates as collateral for a life insurance policy loan, it also remains invested, earning a rate of return that slows the erosion of the net equity in the policy”

[Read more…]

The Bank On Yourself No-Nonsense Guide to Life Insurance

Life insurance is a subject we don’t like to think about. It’s right up there with going to the dentist and writing the annual Christmas letter. (Do people still even do that?)

Thinking about life insurance is one more reminder that we may not live forever. Ugh.

But not going to the dentist doesn’t make things better. And not thinking about life insurance won’t help you live longer.

On the other hand, going to the dentist and thinking about life insurance are two really positive things you can do that are almost guaranteed to make your life better.

If peace of mind, a sense of security, and the knowledge that you’re doing all you can for your family and yourself are important to you, then it’s wise to spend a little time thinking about life insurance.

But life insurance doesn’t have to be complicated or boring—which is why we created this Consumer-Friendly Guide to Life Insurance.

Here are some interesting facts about life insurance that we cover in our Guide. Did you know that …

[Read more…]

Could the Government Seize Your 401(k) and IRA Money?

Is it far-fetched to wonder if the government could take control of your retirement savings in 401(k)s and IRAs?

Or is that just a paranoid conspiracy theory?

The fact of the matter is that it’s not far-fetched, or a conspiracy theory. The groundwork has already been laid.

And the government already gave banks the green light to seize your bank accounts.

Read on for the facts – and I urge you NOT to discount the importance and urgency of this issue affecting your hard-earned savings…

The Government Has BIG Plans for Your Retirement Savings

An article in American Thinker titled “The Feds Want Your Retirement Accounts” revealed that, “Quietly, behind the scenes, the groundwork is being laid for federal government confiscation of tax-deferred retirement accounts. Slowly the cat is being let out of the bag.”

And Bloomberg reported that,

The U.S. Consumer Financial Protection Bureau is weighing whether it should take a role in helping Americans manage the $19.4 trillion they’ve put into retirement savings.”

For the last 18 months, the Treasury Department has been testing the “myRA” program – which Obama created through executive order – no Congressional approval needed.

The myRA, which stands for “My Retirement Account” supposedly “guarantees a decent return with no risk of loss.”

And the only investment allowed in this account is a low-yielding Treasury security.

Of course, the Treasury wants to get more people signed up for this program, because it means more funds flowing right back into the U.S. Treasury to help the government meet its voracious borrowing needs. How convenient… [Read more…]

What’s In “The Big Black Book of Income Secrets”?

If you receive emails from investment advisory services, you may have gotten a sales pitch for The Big Black Book of Income Secrets from the Palm Beach Research Group.

The promo promises you’ll discover “30 unique income tools” in The Big Black Book of Income Secrets.

The offer entices you with a “risk-free 60-day trial subscription to the Palm Beach Letter.” If you’re not satisfied before the two-month trial is up, you’re told you can get a refund and keep the book and some “bonus” reports that are included in the offer.

To find out if The Big Black Book of Income Secrets lived up to its promises, we signed up for the “Platinum Subscription” for $99 for the first year, which comes with additional “bonus” reports.

Three weeks later, the book arrived, containing 22 (not 30 as promised) strategies, with a cover letter from the Publisher, Tom Dyson, explaining that we could log into their website to access the reports we signed on for and back issues of the Palm Beach Letter. (I guess for $99, they can’t afford to mail you hard copies of the reports.)

The First Red Flag in The Big Black Book of Income Secrets is “Income For Life”

[Read more…]

What Nelson Nash and Infinite Banking Got Right

My introduction to Nelson Nash and the Infinite Banking Concept® was a major turning point in my life.

Up until then, I was a business-building consultant to financial advisors. The advisors I coached were always bringing financial products and strategies to my attention, and over the last 25 years, I’ve investigated more than 450 of them.

Unfortunately, most turned out not to be worth the paper they were printed on.

Finally, one financial advisor asked me if I had ever heard of Nelson Nash, and the book he wrote, Becoming Your Own Banker: The Infinite Banking Concept.

I had not, but it sounded very intriguing, so I called and talked to Nelson and ordered a copy of his book. [Read more…]