Dave Ramsey and Suze Orman on Whole Life Insurance: Let’s Debate!

UPDATED October 2014:  It’s been more than 4 years since I challenged Suze and Dave to a debate, but they haven’t taken me up on it yet.  This post sparked some very lively debate and insightful comments, so be sure to read those, too.

Suze Orman, Dave Ramsey and many other financial advice-givers tell you to avoid whole life insurance. However, the policies used for the Bank On Yourself method are dramatically different in three key ways from the kind of whole life insurance that Suze, Dave and others talk about. Here, I reveal these key differences and prove their validity by showing you examples of my own policy statements.

What’s more, my readers have alerted Suze and Dave. But sadly, both have chosen to ignore the facts I reveal below. I’m sure neither Suze nor Dave relish the idea of having to rewrite all their books and materials. But once YOU learn the critical key differences between Bank On Yourself policies and the ones Suze and Dave mention, I’m confident you’ll be asking the same question we hear Bank On Yourself policyholders mention repeatedly: “How come no one’s ever told me about this before!?”

Here are the three key differences:

Dave Ramsey & Suze Orman on Whole Life Insurance

Suze Orman & Dave Ramsey

Key difference imageKey Difference #1: These experts say the money you can have access to in the plan (your “cash value”) grows too slowly in a whole life policy, and say you typically won’t have any cash value at all in the first few years.

A Bank On Yourself-type policy, however, incorporates a special – and little-known – rider or option that turbo-charges the growth of your money in the policy so you have up to 40 times more cash value, especially in the early years of the policy. This allows you to use it as a powerful financial management tool from Day One.

Don’t take our word for it – here’s a statement from a Bank On Yourself-designed dividend-paying whole life policy, at the end of just one year.

And here’s an article that reveals the rate of return of a properly designed Bank On Yourself type policy. It puts traditional investments to shame, and it does that without the risk or volatility of stocks, real estate, gold, commodities and other investments.
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But each plan is different, so to find out how much cash value you’ll have each year – guaranteed – request your FREE Analysis here.

Key difference image

Key Difference #2: Most financial experts, including Suze and Dave, talk about policies where your death benefit stays level for the life of the policy.

However, in a dividend-paying whole life policy, dividends can be left in the policy to purchase additional coverage, while at the same time growing your cash value in the most efficient way possible. This policy statement shows you how the death benefit keeps growing, and proves these policies are different from the ones Suze and Dave talk about.

Please note that this statement is from a policy I started before I learned about Bank On Yourself, and it has grown much more slowly than a policy designed to maximize the power of the Bank On Yourself concept.

Even so, this policy has left my mutual funds and real estate investments in the dust.

Key difference image

Key Difference #3: The financial experts often rant about how, when the policy owner dies, the insurance company “only” pays you the death benefit and keeps your cash value.

But with a Bank On Yourself policy it’s very different, as you can see on this policy statement. It shows you how, had I died on the date this statement was issued, my family would have received a check for more than the original death benefit AND the cash value in the policy combined!

So I am throwing out the gauntlet to Suze, Dave or any expert who wants to challenge me. Just name the time and place!”

And remember, Bank On Yourself will beat anyone’s best financial strategy or we’ll pay you $100,000!
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No two policies are alike, because each one is tailored to the client’s unique situation. So your results will be different. To find out what your bottom-line numbers could be, and how much your financial picture could improve if you added Bank On Yourself to your financial plan, request a free Bank On Yourself Analysis. There’s no obligation.

Update! Our hidden video camera captured Suze Orman and Dave Ramsey discussing Bank On Yourself…

If Bank On Yourself is so good, why isn’t everyone already doing it?

If you browse the personal finance section of any bookstore, turn on the TV or open a magazine on finance, you’ll discover that 99 out of 100 financial “gurus” will insist that whole life insurance is a lousy place to put your money. Most will recommend you buy term life insurance instead and invest the difference in mutual funds.

That’s in spite of the fact that, had you invested in an S&P 500 index fund for the past 13 years, you most likely have little to show for it other than a pile of pocket lint and a lot of sleepless nights. And that doesn’t even factor in 35% inflation during this period!

But I’m getting a little ahead of myself. Part of the problem is these financial experts know nothing about the specially designed type of dividend-paying whole life policy used for the Bank On Yourself method, as I’ve demonstrated above.

It’s not really their fault. Out of 1,500 major life insurance companies only a handful offer a policy that has all the features required to maximize the power of this concept. That’s one reason it’s not even mentioned in most industry training programs.

And the fact that an advisor who helps a client implement a Bank On Yourself-designed policy takes a 50-70% cut in commission could be another reason why you haven’t heard of this before now.

Learn how to find a Bank On Yourself Authorized Advisor who knows the best companies to use for this concept, and will structure your policy properly – even though it means taking a big commission cut.

The Bank On Yourself method lets you:

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  • Never again suffer another losing decade in your financial plan… or even a single lost day
  • Look forward to opening your account statements, because they always have good news and never any ugly surprises
  • Grow your savings by a guaranteed and predictable amount every year2
  • Fire your greedy banker and credit card companies and become your own source of financing – get access to money when you need it on your terms by answering just one question: How much do you want?
  • Have a financial safety net to see you through life’s inevitable challenges and emergencies
  • Enjoy true financial security that comes from knowing you have a rock-solid financial foundation and a chunk of your hard-earned dollars in a plan that goes in only one direction – UP
  • Have the peace of mind that comes from knowing the answer to the question, “Do you know what your retirement account will be worth on the day you plan to retire?”
  • Work with a qualified Advisor to map out your retirement in a logical step-by-step process

Comments

  1. max herr says:

    What’s missing from all of Pamela’s responses is: What is “guaranteed” as long as money has been borrowed from the policy?

    The answer is LESS DEATH BENEFIT. The unpaid loan amount and unpaid interest will be recapture from the death benefit before it is paid to a beneficiary.

    What else is unsaid is how long it would take to accumulate $25,000 to buy that car (or those four cars) she is so fond of discussing. A 30-year old who buy a $1,000,000 whole life policy today would pay about $10,000 per year in premiums, and would not have $25,000 of loanable cash value for about 6 year. If they borrowed the full $25,000, but did not repay the loan, it would take another 5-6 years to amass another $25,000.

    There is no magic here. That $10,000 could go into a shoebox — earning exactly ZERO PERCENT — and in 3 years you’d have the $25,000 to buy the car. And two years later, you would have enough to buy another car.

    But you would not have a $1,000,000 death benefit either.

    As the old saying goes, You Can’t Eat Your Cake and Have It Too.

    The dialogue in this blog is rather different than the marketing hype on the home page. That’s the difference between listening to someone who knows what life insurance is, and someone who sells life insurance AND knows how it works.

    The “guarantees” mentioned on the home page quickly fade when you read other parts of the website.

    • Max, thank you for (once again) confirming my statement that most financial advisors and insurance agents have no clue how dividend-paying whole life insurance works, let alone how the supercharged policies used for Bank On Yourself work.

      Clearly, you haven’t taken the time to read this blog post or look at the actual policy statements we posted here to prove our points.

      You’ve also missed all the examples of middle-income people who (due to the way Bank On Yourself policies are structured) were able to accumulate enough in their policies to finance a car themselves in a much shorter period of time then you spell out.

      You also don’t understand that the death benefit of these policies grows exponentially, just as the cash value does, potentially far offsetting any depletion of your cash values created by policy loans. I give a good personal example of this here.

      The saddest part of this is that you actually seem to believe you know it all. Pity for your clients.

    • Do you have one of her policies? I do. I have banked out of that policy for years, and love it! It is set up different that regular life policies. You need to understand riders before you bag on her plans. I have multiple BOY plans and they are kicking butt. I love being my own bank while the nay sayers continue to get slaughtered. Good luck

  2. Rose H. says:

    I just stumbled across this post and noticed Max’s comment…. Just “for fun” (I work at a company that designs BOY policies), I ran a sample illustration on a 30-year-old male, putting $10,000/year into a policy until retirement age. He was able to take a $25,000 loan in Year 5.

    Of course we would never teach our clients to take loans without repaying them, as, for anyone familiar with the concept, we know this is essentially “stealing” from yourself – and your retirement! However, just for the sake of Max’s example, I did not show any loan repayments. The example client in this case would be able to take another $25,000 every three years, until age 59, without making ANY loan payments – he is only paying his annual $10,000 premium.

    At Age 65, his death benefit is just shy of $925,000 – this is net of any outstanding loans – so this is what his beneficiaries would receive if he were to pass away at that point.

    Remember he has taken out $225,000 ($25,000 x 9 cars), free and clear (about the same as if he saved it in that shoebox Max mentioned). He ALSO has pretty close to a million left in death benefit.

    So yes, in this case, with Bank On Yourself, you CAN have your cake and eat it too! :-)

    (For you number crunchers, in the illustration I ran, he paid a total of $350,000 in premiums over 35 years. If you add up the loans he took out and never paid back ($225,000), plus the remaining death benefit ($924,984), he comes out ahead by $799,984 – not too shabby, in my humble opinion….)

    • What I’d like to know is what happens to the death benefit for this example after age 65. In my case, I took out a 30 year level term policy at age 40 with a premium of $558 per year that does not increase, for a death benefit of $500,000 (that does not decrease during the 30 year term) so up to age 70 I have a $500,000 death benefit for a cost of $16,780 in total premiums. The man in the example had nearly double the death benefit for his beneficiaries at age 65, but had to pay $125,000 ($350,000 less $225,000 loaned back to him) for it. It seems to me that I have the better deal here.

      • Pamela Yellen says:

        At age 70, if you haven’t saved enough, you will need to take out a new policy – at a much higher rate, assuming you even qualify for it at that point. (And most 70 year olds today have managed to save only 25% of what they’ll need for retirement, according to AARP.)

        All the premiums you paid into it are gone, too, of course.

        There is no comparison between term and dividend-paying whole life, which is a policy you don’t have to die to win.

        These policies grow your nest-egg safely and predictably, allow you to become your own source of financing, and much more.

        Yes, they have a death benefit, too, but it’s the living advantages that make Bank On Yourself unbeatable.

        That’s why the $100,000 cash reward I’ve offered to the first person who has a strategy that can match or beat it remains unclaimed after 3 years.

    • I’m not sure if I’ll get a response since this is over a year old, but it’s still worth a shot. I don’t believe companies do things out of the “goodness” of their hearts. With that said, I don’t see how the company is benefiting. I am obviously on this website because I am uneducated when it comes to BOY’s but the general rule is, if something is to good to be true then it’s not true.

      Again, I don’t see how a company would benefit from providing benefits like these, and if the company doesn’t benefit on paper, then almost guaranteed it’s a scam. Can someone tell me how this company can afford to do this and make a profit?

      • There are plenty of websites where you can learn the basics of how life insurance companies operate. They are VERY good at over-promising and over-delivering.

        The companies used by the Bank On Yourself Authorized Advisors have been in business over 100 years. They make a profit (as they must) and excess profits are returned to the policyholders.

    • Larry Hedrick says:

      Where does the insurance company get the money to make these payouts?
      Sounds like Voodoo accounting, yet another pyramid scheme?
      Again, where does the insurance company get the money? Can they print it? Invest it in treasury bonds? Mortgages? Corporate bonds? Stocks? Options? Are they selling short? Do they invest my money and then leverage 10:1 and hope things go up? Do they get the money from me today to pay those who bought in last week? Just where does this golden goose live. Tell us and we can all get the eggs for free but, I doubt you will do that since it seems to be a big secret.

      If they are not a central bank like the Fed which has been granted the power to print money, they can only get the money from the same places everyone else can get it. And, they can get it without paying brokers and insurance companies.

      So, I will give you one more opportunity to explain where the money comes from. What was your name again,,,,,,, Patty Madoff or something like that?

      • In a nutshell, life insurance companies are strictly regulated and must have reserves on hand to pay future claims.

        They are not allowed to do “fractional reserve lending” like banks are, where they can loan out the same dollar 10 or more times.

        You can learn more about the safety of Bank On Yourself here.

      • It’s simple math. Insurance companies make money primarily through bond purchases, stock options and policy loans. The concept of insurance is to have many more people paying into their policies than the insurance company has to pay out as interest and death benefit which makes life insurance the #1 financial class in the world. They calculate through statistics the odds of an applicant dying by a certain time and adjust the premium accordingly. When you take out a loan against your BOY policy the insurance co. charges interest but the KEY about a non direct recognition policy is the cash value is still earning interest as if you have no loan at all. Which makes the interest you pay on your loan effectively lower than a bank of credit card which have NO death benefit!
        Let’s take it a step further. When an insurance company pays a tax free death benefit to your beneficiary(s) Where does the money go? It usually goes to a younger survivor who would then also be able to afford their own Insurance policy completing the circle. So a beneficiary would be wise to do a maximally funded policy (which BOY has perfected) and then open up as many BOY policies as possible for their spouse and children. etc.
        I am amazed to read arguments like taking a policy loan and not paying it back would reduce the death benefit if you die so BOY is a bad idea. So let me get this straight. If I save my seed money in a bank account earning zero interest and having zero death benefit and then spend my seed money to buy something leaving me with only a depreciating asset OR keeping my seed money in in a bank with zero interest zero dividend and zero death benefit and then borrowing my own money from the same bank and paying a much larger spread on the loan somehow is wiser than saving my seed money in a dividend paying, interest bearing and death benefit providing policy and then continue collecting interest on that seed money even though I’ve borrowed against it and still have a death benefit that is greater than the seed money I’ve deposited even if I never pay the loan back is a bad idea?
        People fail to realize that your money must pass through time continuously earning interest to experience exponential growth. Every fee, tax, expenditure (spending which is called opportunity cost (lost) and inflationary force on your seed money severely impede the exponential process. The numbers would AMAZE you.

      • This is my question as well. I actually used to work for a life insurance company and they invest in the same things you speak so adamently against; stocks, bonds, real estate. I understand they are playing the law of averages but how you can make so much more money in a whole life policy then by investing in the ‘market’ directly when the insurance company who is backing your return is investing in the ‘market’? Seems the return would be less as you are involving a “middle man”.
        And don’t say that insurance companies can invest in things individuals cannot. That used to be true but not so much anymore. Individuals can now invest in private placements, both equity and debt as well as private real estate deals.
        The benefit I see to adding an insurance company into the mix is to mitigate risk, not to maximize return. I believe higher returns could be achieved elsewhere but if we compared returns on a risk adjusted basis does it make sense. That’s would I would like to see, a risk adjusted rate of return for this program versus the S&P 500.

      • Larry – Most people really appreciate a good discussion. Name calling does not contribute to a more educated information seeker. Although you may not know it, the insurance industry is one of the most regulated industries in America. They are regulated by each state and audited on a regular basis. They must maintain a statutory reserve to meet their financial obligations. In the 30’s it was the insurance industry that bailed out the banking industry.

    • You would have just over $1.7 million in a Roth IRA if you contributed the same $10k per year at a compound annualized return of 8%. I’ve often believed that the two best assets to leave to your heirs are life insurance and Roth IRAs, both are income tax free.

      • I love the question asking how much you would have if you invested the same $10,000 per year in the S&P. Easy question, but very difficult answer because it depends on the sequence of returns the investor enjoys during the time in question. Few can match the return history of the S&P because the average return history assumed fails to take taxes, fees, and trading costs into account. When these additional expenses are considered, the average investor earns (Dalbar Study) less than 5% and has to assume all risk and volatility. In addition, there is the cost of your cash position earning nothing and the lower returns history allocated to bonds (which drag down your overall return)
        In addition, the emotions of fear and greed cause many to miss most of the huge run ups in the market but enjoy most of the crashes. I have to laugh when financial celebrities use the average returns (not compounded) of the 80’s and 90’s (12%) to tell people how to plan for retirement. If you know how to use a financial calculator, go figure the compounded rate of return of the DOW stock market index for yourself since 1900. You will be shocked at the real rate of return. Don’t take my word for it-do the math yourself. Stable, steady returns made possible with the right type of insurance policy properly structured for this purpose are quite favorable and should be considered as part of your financial portfolio.

  3. Hi Pamela,

    Is the same strategy available for a defined benefit plan with an insurance component? If so I’d certainly like to hear more.

    • I made the mistake of putting life insurance into a qualified plan years ago and then they changed the rules and I had to come up with $300K to buy it out of the plan.

      Besides, the GOVERNMENT controls the money in qualified plans, NOT you! They can and do change the rules whenever they want. They control how much and when you can access your money. Life insurance puts YOU in the driver’s seat.

      Don’t fall for this trap. And compare Bank On Yourself to 401(k)s and other qualified plans here.

      • I must be missing somthing here in comparing qualified plans to BOY, at my age (72) my whole nest egg(90%) is in qualified plans (there isn’t much choice when you are working except to contribute to a qualified plan or lose big time to taxes). If qualified plans and BOY cannot work together there is no other source to fund BOY.

        • Depending on the situation, qualified plan monies are often used to fund a Bank On Yourself policy.

          At your age, many people are moving the funds from their retirement accounts as a lump sum into a type of whole life policy specifically used for older folks.

          I’ll be writing about this more soon, but in the meantime, you can find out how much predictable, guaranteed income the policy would throw off for you when you request a free Bank On Yourself Analysis.

          For the record, there IS a better alternative to funding a qualified plan while you are working – fund a Bank On Yourself policy with those dollars instead, even the employer match isn’t worth it for most people – based on actual results over the past two decades.

          And Bank On Yourself gives you 18 powerful advantages and guarantees. No other financial product, strategy or vehicle can match it – or even come close.

        • “There isn’t much choice when you are working except to contribute to a qualified plan or lose big time to taxes” When you contribute to a qualified plan and deffer the taxes it may sound good up front but you will pay much less taxes on your “seed” money when you earn it than on your lifelong “harvest” when you retire.

  4. Rose H has explained this program more clearly in one blog entry than everyone involved with promoting this concept ever has…including the lady that wrote the book…Thank you Rose…More people involved with Bank on yourself should sit down with Rose and have her explain this concept…good for you Rose

    • Thanks Dan! Just doing my part, when I can, to dispell the many myths out there about Bank On Yourself…. Financially speaking, personally, it’s the best thing I ever did for myself, and if I can help others understand it better, then more people can reap the benefits and in the meantime reduce our country’s reliance on big banking!

  5. Catherine C. says:

    Pamela, you have the patience of Job! Explaining a different way of investing can be frustrating and time-consuming, yet your responses are calm, clear and concise. I’m really enjoying your website. ;-)

  6. So to Rose’s response,
    how is that different than if i just put $10,000 in any other investment for 35 years. At 4% i would have $765,000. Is there another advantage that i am missing here?
    thanks, this is really interesting.
    Bill

  7. Thanks to Pamela and Rose for their explanation and examples to clarify what “BOY” is and how it works. My question is, do you open just one account to service a college fund and other expenditures as given as examples here?

  8. After having read about Bank on yourself you have gotten my interest. That is why I am meeting with one of Pamela expert financial consultants this monday 2/13.. Can’t wait to hear how this program works. And to Pamela and all of her possy thanks for spreading the wealth.. Knowledge is POWER !!!!!!!!!!!!!!

    • Tony – you are most welcome! It warms my heart to see people like you who actually follow through on the knowledge they gain!

  9. What are the name of some of the Ins. Co. you use?

    • I’m not a licensed financial advisor, I’m an educator. As such, I’m not legally allowed to recommend or even list specific companies.

      Keep in mind that just knowing which companies to use isn’t enough. Your advisor must ALSO know how to properly structure the plan or it will grow much more slowly, lose the tax advantages, or both. A properly trained advisor also coaches their clients on the best ways to use the policy to maximize the growth.

      I can tell you, however, that the Bank On Yourself Authorized Advisors only use companies that rank in the top 3% of all insurance companies in terms of financial strength. And they have all paid dividends every year for at least 100 years.

      When you request a free Bank On Yourself Analysis, you’ll get a referral to a knowledgeable Bank On Yourself Authorized Advisor who will make a recommendation based on your specific situation, and encourage you to do your due diligence into any company they recommend for you

      If you’re a financial advisor who’d like to apply for the Authorized Advisor training program, you can find out more about it here.

  10. I’ll admit, this concept seems appealing on the surface but its really just the same recycled garbage that the whole life industry has used for years to rip off middle America.

    As a fianncial advisor that does what’s right for clients 100% of the time, I only sale term. The more whole life you sale, the easier my job becomes because when clients see how they are being ripped off to make the insurance agents rich, they almost always switch to term and get more coverage for less money.

    The revolution that began with AL Williams has virtually destroyed the whole life industry and you may come up with a flashy gimmick to get some people back in but the facts are facts and it won’t work in the long run.

    • The highest form of ignorance is to reject something you know nothing about.”

      ~ Wayne Dyer

      The problem in America isn’t so much what people don’t know; the problem is what people think they know that just ain’t so.”

      ~ Will Rogers

      P.S. whole life sales are up and term life sales are down as people are finally hearing the truth.

    • Pam,
      I’ve been using BOY concept for many years. In response to Tom- ALW was defeatable by his own words, “Buy the cheapest term.” An independent agent using the same company that provided his term could beat his “prices.” (I did regularly for the “lock in insurability” type plan.) But the BOY concept is not a “price” game. It is a solid financial concept used by many to attain wealth (the money we keep) while providing Permanent protection. A simple example would be two 18 year old young men buying $100,000 of insurance. One buys term and by age 70 has SPENT $15,952, can no longer buy term, and has absolutely nothing to show for it.
      His friend buys a BOY type whole life plan (without added funds) and stops payment when he reaches $15,952 (just to make things “fair”). HIS plan has a cash value at 70 of $96,624 and a death benefit of $167,422. BOTH of these continue to GROW (to age 120 maturity) with no further premium! This is a true and factual example and blows the whole “BTID” concept to smithereens. Now, considering that only 2% of term policies are kept to term end and only 1% of THOSE are ever collected on, which type of insurance is the “ripoff” and makes the most pure profit for the company? Which one Pays Out no matter what? (Live, Die, Quit paying in.)
      The TRUTH is its own defense!

    • Tom: It is great that you sell term insurance. It is as great a concept as renting the place you call your home. Term insurance is a great tool for “short term needs”. It is a temporary solution for a temporary problem. The other problem is that another advisor will probably have to deal with your client when their term insurance expires and they find out it is 4X more expensive to renew it.. assuming they even can. I know few widows that tell me they are really in great shape and have all the money they will need for the rest of their life…do you? The fact is that buying term and investing the difference generally does not work. It is a dismal failure. In addition, do you think your clients would rather pay for their insurance with tax free dollars or after tax dollars. If you agree tax free may be better, than you may want to consider more education on how dividend paying whole life insurance actually works.

  11. Does this program work if it is started once you retire at 65 years of age?

    • Many people age 62 and older start Bank On Yourself plans (I devote a whole chapter of my best-selling book to this). And there are special programs for people up to age 85.

      Remember, there’s a good likelihood you’ll live another 20-35 years, so you need to take action NOW if you want to make sure your money lasts as long as you do.
      The only way to find out for sure if you can benefit from Bank On Yourself is to request a free Analysis.

      There’s no obligation and you won’t even be asked to buy anything during your first meeting. But at least you’ll know now, rather than looking back 10 years from now and saying, “I wish I’d looked into that 10 years ago!”

  12. Samuel A. Guthrie says:

    After reading this blog or what ever you call it. I have been sold on bank on yourself. I really wish I had gotten into it from what I have read (I have read Pamela’s Book) From my understanding of the book 10 years ago I was out of debt. Had $25,000.00 in a Roth IRA. The past ten years I have tried to enhance my holdings. Instead I have gotten in debt All mostly trying to enhance my holdings. I did not realize that I was putting so much money in publications. I got in debt with my credit cards by suposely being mentered on investing. I still didn’t learn it to where I was confident. This whole concept sounds like good sence to me. Samuel A. Guthrie

    • Many of us come to the same conclusion after learning things through the school of hard knocks.

      The difference is that you’ve taken the steps needed to take back control of your financial future.

  13. It seems to me that Bank on Yourself plans may be great for small business owners but for people who simply want an income stream would best be served by using normal Fixed and Index Annuities as well as Variable Annuities that today have a “step up” rider that protects the legacy issue and can provide a substantial income stream. Annuities today are not required to annuitize thereby protecting the beneficiary. What the advantages of Bank on Yourself in these cases when borrowing money is a non issue? The income stream is all that matters and the annuities have the guaranteed growth.

    • The return on a Bank On Yourself plan is higher than an annuity. You’ll understand the other reasons Bank On Yourself can beat annuities by taking the $100,000 Challenge.

      • Okay. The deal is that the features offered in Variable, Fixed and Index annuities have improved drastically and dramatically. As you know these are insurance products as well. The caveat with Bank on Yourself is you have to maintain the policy in force and as far as the accumulated funds are concerned, they are not absolutely tax free depending on how a person accessed the funds. There are Variable Annuities that can and do exceed what Bank on Yourself can offer. Again, there is absolutely no reason what so ever to use Bank on Yourself if you are not a business owner. In addition, a person would already have to have a huge amount of money to place in an insurance account to make it worth while to borrow any significant amount. Then again, anyone can do what Bank on Yourself is promoting by following the practices using a combination of banking principles available today without using any insurance company as a partner. Again, the “step up” feature in a Variable annuity allows an investor to earn a guaranteed amount or market value. If a client does not have a business it makes absolutely no sense to use Bank on Yourself and have to tie himself or herself down with an insurance policy. I like the concept of Bank on Yourself but it is not the answer to everything and it is certainly not right for everyone. When you know how money really works there plenty of options out there to grow and protect income. The $100,000 challenge is rigged to make someone consider the borrowing principle. Again, in order to borrow a certain amount you have to have that amount of more in the separate account. If you don’t have you can’t borrow it.

        • There are so many misconceptions in your post that I wouldn’t know where to begin correcting them. So I won’t.

  14. The joke would be considering Dave Ramsey and Suze Orman financial experts. I don’t think bankruptcy would add to the confidence to my peers. As for whole life, I LOVE it, so long as it is from the right place and used/sold in the correct way. One thing I hate about these “gurus” arguments is that they are all titled “term vs whole”. While the correct title should read “term vs permanent” anyway, my argument would be that most solutions involve term AND permanent. Why they argue one or the other is beyond me. I guess it’s the fact that they are not licensed or qualified financial advisers. I appreciate anyone that has the slightest clue what they are talking about, so thanks for the article. I’ll happily join the debate if it ever actually happens.

  15. Will Moran says:

    Pam
    For 27 years as a financial advisor, I’ve sold ‘buy term and invest the difference'; or I have used Universal Life. I now feel I’ve done a great disservice to many clients & missing out on Whole Life and the dividends they always pay.

    In the last year, I’ve become an authorized Practitioner of becoming your own banker for it’s obvious benefits to clients. My background is a Chartered Life Underwriter and I have a Masters degree in Economics. Just yesterday I helped a young married man age 32 with 2 kids, buy a $275,000 dividend paying whole life policy from a mutually owned company (one of the few in Canada) with a rider that maximizes the cash value and annually increases their insurance. I added a $1,000,000 Term 20 rider for him (his bride was uninsurable). Total cost per year is $11,148 until year 20. (He intends to use it for many living benefits discussed in your blog). After year 20, he will drop the term insurance rider and his cost will reduce to $10,343 per year until 75 — if he chooses to fund it that long. (This amounts to only 3.3% of his total annual income).

    In year 21 he can drop the $1M rider since his WL life insurance will have now grown to $1,163,873 (and growing), and have a cash value of $379,173 (and growing tax free), with the current dividend scale.

    By the time he is 75 (the new retirement age in Canada… LOL) he will have $1,489,604 in cash value for supplemental retirement income to draw on; and $2,340,425 of life insurance. At this point he will be withdrawing the funds rather than loaning them to himself. He can withdraw $101,702 for 20 years. (Please note that his withdrawals are NOT 100% taxable like withdrawals of most qualified ‘retirement’ plans). At age 96 he will still have $272,212 in cash and $296,323 in life insurance. Like the old saying: You Can’t Touch That!

    If my client where to follow Tom’s “doing what’s right 100% of the time” outdated way of thinking, and bought term insurance, of let’s say $1,250,000 payable to 75, my client would have to shell out $304,655, if he paid it to 75 — AND NEVER SEE A DIME OF THAT MONEY AGAIN!
    As you can see term insurance is extremely profitable for the insurance company which in turn allows them to pay nice dividends to us WL policyholders! The actuaries know the chance of a person dying BEFORE 75 is LESS likely than AFTER 75, and they’re still on the hook! So it’s best NOT everyone buy a dividend paying WL policy because they will NEVER be let off the hook. That’s why they love people like TOM who tell people “buy term & invest the difference 100% of the time”!

  16. Do you have any “single premium” plans? I do not want to commit to pay some money every year.

  17. I wanted to comment on the bank on yourself strategy as i have been in the industry for some time. This is a great strategy if structured correctly, for the right person, at the right time. Even Ben Bernanke (the former Fed Chairman), keeps 90% of his personal net worth in insurance and annuities. You can look that up if you don’t believe me. However, I feel that may be a little extreme as I personally believe that the more buckets that you are saving into the more options you will have. In other words, I don’t believe this to be the end all be all vehicle, but an excellent vehicle none-the-less. The 4 biggest advantages are:
    1. Tax Deferred Growth
    2. Tax Free Access
    3. No maximum contribution
    4. Can access before age 59 1/2
    However, to fully take advantage of these the policy has to be structured correctly with the correct company. I’ll explain each one. Structured correctly: The policies can be geared to be more favorable with death benefit or more favorable with cash value. As an advisor I have sold both strategies depending on the client and what their needs are. In terms of generating a larger death benefit that will pay out eventually, the goal is to attain that permanent death benefit at the cheapest cost. For example Contributing $5k/year to a $500k policy. However, if you want the cash vaule to excellerate you simply stuff in more money i.e. $10k/year to the same $500k policy. Think of this like paying more on your mortgage. When you pay more on your mortgage you will pay down the principal faster. Same concept applies here.

    Now as far as it being structured with the appropriate company. The most important aspect here is that policy be through a mutually owned company not a stock owned company. The reason this is important as it relates to building cash value is a mutually owned company is owned by the clients. Stock owned companies are owned by stockholders. The goal for each company is to be profitable. The difference is what they do with the excess profits. A stock owned company will return the excess to the stockholders, and the policyholders get whatever is left over. With a mutually owned company all the excess profits are returned to the policy holders. Only about 5% of the industry is mutually owned, which is why most of the policies out there don’t perform very well.

    And to comment on the previous posts about what insurance companies invest in. It is true that insurance companies do invest in stocks and bonds but they do have access to more unique investments that individuals could invest in, but lack the means to do so. Regarding stocks and bonds, a mutually owned company has a completely different time horizon than an individual investor as well as a stock owned company so the investment philosophy is different. A large mutually owned company may have a time horizon of 100 years as opposed to an individual investor having a 20-30 year time horizon or a stock owned company having a time horizon of 1 quarter to show a good quarterly earning report. Because of this they can invest differently. For example, I know there are some mutually owned companies that are still collecting on money market returns from the 80’s when interest rates were paying over 10%.

    In a nutshell, people are pooling their money to an insurance company with the belief that they can invest the money better then they as an individual can. And frankly when a company has billions of dollars per month in cash flow, they generally can invest better. When the company generates a rate of return within their own portfolio they then return the money back. The reason this is housed in life insurance is life insurance has it’s own section of the tax code, section 7702. Feel free to read more about this to understand it.

    In summary, I am an advisor who practices what he preaches and my wife and I contribute 10% of our income to this type of strategy. I don’t know Pamela, but she appears to be very knowledgable on the subject. However, I do respectfully disagree that this should be where you put all your money as everything has different pros and cons. This should be an environment to store your safe and secure dollars as you will not hit a home run with the rate of return in this environment. The best performing companies have ,maxed out in dividend interest rates ranging in the 12-15% range. However, you will never strike out either. Even in 2008 it was very common for dividend interest rates being 6-8%. So this is a very steady predictable place for individuals to store money.

  18. So, we currently fund our own BOY starting at 42 years of age…I’m *so* glad I was turned on to this info a couple years back (it does take awhile to investigate this to the point of confidence).

    My question: I’d LOVE to educate and sell BOY out of the pure joy of helping people take control of their finances. However, I’m just a web/marketing manager with no banking or insurance experience. Is this a pipe-dream to pursue? If not, what major steps/hurdles do you see in my way that I could chip away at?

    Thanks :)

    • Pamela Yellen says:

      It’s so nice to hear from you, John! Glad to hear you are now a Bank On Yourself Revolutionary! Being an Authorized Advisor does take a lot of training. Even experienced advisors typically need a year of specialized training in how to help clients implement this strategy successfully. Normally a year of experience in financial services is required to be accepted into the program, so I might suggest contacting the Advisor who helped you with your plan to see if they might be willing to mentor you.

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