This is the fifth installment in our series of answers to the most-asked questions we got on our recent “Ask the Bank On Yourself Advisors” online event.
This question is about whether you can pay a larger amount of premium into a Bank On Yourself policy in the early years, to supercharge the growth.
The answer is “yes,” and the big advantage is that it allows you faster access to a higher amount of cash value that you can use for a variety of purposes.
Here are three common situations where people do “lump sum” funding of their plans…
Situation #1: Debt Consolidation
The Bank On Yourself Authorized Advisors may help a client to “front load” a policy in order to help them pay off high-interest-rate debt.
This typically involves repositioning other assets the client has into a Bank On Yourself policy, so they can turn around and pay off debt they owe to outside financial institutions.
The benefits of transferring a debt to your Bank On Yourself plan are numerous and include:
- Swap out high-interest compounded rates for simple, low interest rates
- Recapture interest into your policy that you would otherwise pay and never see again
- The money in your plan continues growing as though you never touched a dime of it (if your policy is from one of a handful of life insurance companies that offers this feature)
- You can pay back your loans on your own schedule, which gives you great flexibility when the proverbial you-know-what hits the fan. You can reduce or skip some loan repayments without having to worry about black marks on your credit report, collection calls or a goon squad showing up to repossess your stuff
- You can get access to 85-90% of your cash value when you want or need it, for any reason, with no questions asked, no nosey applications to fill out, no pledging your first born and no begging!
To learn more about how this works, check out our Consumers Guide to Bank On Yourself Policy Loans here.
Situation #2: A Better Place for Your “Safe Money”
Some people have relatively large amounts of money they consider their “safe money” or rainy-day money in savings or money market accounts or CD’s, or even bonds, that are currently paying interest rates so low you practically need a magnifying glass to see them.
Moving some of your safe money into a Bank On Yourself policy gives you many advantages, including…
- Guaranteed, predictable growth that is many times higher over the long term than what conventional safe money vehicles pay
- Tax-deferred growth
- Tax-free distributions, under current tax law
- No market risk or losses
- Flexibility and Control – you have access to your money with no government restrictions or penalties. (Have you ever noticed how 401(k)’s, IRA’s and other government-sponsored retirement plans have more strings attached to them than a puppet?)
- Income tax-free death benefit for your loved ones
- Your policy is guaranteed to grow by a larger dollar amount every single year you have it
Situation #3: Fund a College Education Without Sacrificing Your Own Retirement Savings
Another reason to “overfund” a Bank On Yourself policy is to pay for a college education. This has many advantages over the conventional approaches to saving for college, such as 529 Plans, UGMA’s and UTMA’s, and student or parent loans.
The advantages of financing a college education through a Bank On Yourself plan include:
- You control how the money is used
- You avoid having the money count against you when applying for federal student aid
- The growth of your money is guaranteed
- Your plan can finish funding itself if you pass away
To see examples of how Bank On Yourself can be used to pay for college without going broke, check out this video and transcript.
These are just a couple examples of why “overfunding” or putting a lump sum into a policy in the early years makes sense.
IMPORTANT: No two Bank On Yourself policies are alike!
Each one is custom tailored to the client’s unique situation and goals. To find out what your numbers and results could be if you added the Bank On Yourself method to your financial plan, request your FREE Analysis and referral to one of the Bank On Yourself Authorized Advisors (if you haven’t already done so).
Keep in mind that the only regret most people say they have about Bank On Yourself is that they didn’t start sooner, so don’t dilly-dally! There’s no cost and no obligation and no arm-twisting! You’ll know in advance your bottom-line guaranteed numbers and results before you even decide to move forward with your plan.