Infinite banking presents an alternative method for those wishing to build wealth. Instead of borrowing from the bank, infinite banking allows you to borrow from yourself on your own terms. However, because infinite banking isn’t widely understood, you might be wondering, “Is infinite banking a scam?”
According to estimates, the mean average household debt is now $145,000 in the US.
Having a credit facility on hand can be invaluable, especially when it comes to large financial steps, such as buying a home or starting a business. It can also be a big saving grace in emergencies.
However, traditional credit comes with a series of cons. Interest rates can be high. Terms can vary, and credit applications can take time.
Are you looking into alternative wealth methods for your family and asking the question “is infinite banking concept legit?” Continue reading to find out the truth about infinite banking.
Infinite Banking Is a Tried and Tested Wealth Building Method
Although you might have only recently heard the term “infinite banking”, it is actually quite an old money management method. Infinite banking has been around for over a century. In 2,000, Nelson Nash published his book “Becoming Your Own Banker,” which popularized the method he had been practicing for 20 years prior.
Since then, infinite banking has morphed from a concept that was only known to a select few into something anyone can find out more about if they’re willing to invest the time and effort.
If you’re wondering “what is infinite banking” and want to know more, check out this post.
Infinite Banking Leverages Whole Life Insurance
If you have yet to read up on the concept of infinite banking, it is underpinned by whole life insurance policies. The terms of these policies allow the holder to borrow money from their life insurance capital and repay it on their own terms.
Although this might sound too good to be true, it is not. Certain whole life insurance products facilitate this in a way that is conducive to cost-effective borrowing and effective wealth building.
In recent times, whole life policies have become less popular, thanks to their substantially higher premiums. Not so long ago, however, whole life insurance was preferred over term life insurance. The reason for this was because whole life insurance is less risky and can act as a savings vehicle.
While term life insurance is only valid for a certain period, whole life insurance usually remains in place over one’s entire lifetime. At the point of death, the designated recipients of the policy receive a guaranteed death benefit.
In short, infinite banking centers around one of the safest insurance and savings vehicles there is, that of whole life insurance.
Infinite Banking Offers Legitimate Tax Benefits
You might come across claims stating that infinite banking holds few benefits—but there’s no denying that it offers legitimate tax advantages.
When you invest in a whole life insurance policy, your premiums accrue what is known as a cash value. This cash value earns interest over time. One of the tax benefits of whole life insurance policies is that taxation of interest on the cash value is deferred.
What’s more, death benefits from whole life insurance policies are not taxable. Lastly, any cash you borrow from your policy’s cash value is not deemed as income by the IRS, and you won’t get taxed on it.
Infinite Banking Has Funded Some of America’s Biggest Brands
Because infinite banking is still somewhat of a niche concept, few people know that it has, in fact, funded some of America’s biggest brands. For instance, when Ray Kroc bought out the McDonald brothers, he leveraged the cash value of his life insurance policy for capital to pay for wages and re-branding costs.
Just think of that. Without infinite banking, Mcdonald’s might never have grown to what it is now.
Some other businesses that were started or saved thanks to cash borrowings from whole life insurance policies include JCPenney, Pampered Chef, and even Disneyland.
Of note, in 1955, Walt Disney borrowed against the cash value from his life insurance policy. He needed the funds to finance Disneyland, his new theme park. The rest, as they say, is history and today The Walt Disney Company has grown with annual revenue of nearly $70 billion (in pre-pandemic 2019).
Whole Life Insurance Offers Good Returns
Although whole life insurance policies are primarily designed to provide a death benefit, many also offer a good return on “investment.”
When you accrue cash value in a whole life insurance policy through your premiums, this cash value earns interest. The exact interest you receive will depend on the policy you choose. However, it’s safe to say that if you opt for a policy from a mutually owned life insurance company, capital and growth are generally far more reliable than many other investment vehicles.
This is because these policies are invested in non-correlated assets.
Things to Be Aware of With Infinite Banking
As you can see, infinite banking offers a range of unique benefits. If based on legitimate whole life insurance products, infinite banking is anything but a scam.
However, before you start shopping for whole life insurance, it’s essential that you do your research. When it comes to infinite banking pros and cons, the primary con is that you need to invest some time learning about it. This is because your infinite banking system’s success is heavily reliant on the type of whole life insurance policy you choose.
For the system to work as planned, you need to make sure that the policy you choose allows for the freedom and returns that drew you to infinite banking in the first place.
Ready to Start Your Infinite Banking Journey? Get the Support You Need
Although infinite banking may sound too good to be true at first glance, it is most certainly not a scam. In contrast, it can be a transformative method for building wealth and facilitating financial freedom.
Here at Living Wealth, financial freedom and wealth building are what we’re about. Our passion is helping others break free and build a solid financial future for their family.
If you’re looking for information on the infinite banking method and wealth-building or wondering, “is infinite banking right for me?” we have a wealth of resources, including our free course.
Additionally, we also offer one-on-one consulting services to those looking to take the next step.
Ready to make your robust financial future a reality? Contact us today, and we’ll do everything we can to help.
