Join us as host Nate Scott takes a deep dive into the world of Infinite Banking and its transformative power in building wealth and funding investments. Get ready to expand your financial horizons as Nate unveils the key takeaways from this enlightening discussion.
In this episode, Nate provides an in-depth look at how he uses Infinite Banking to fund various investments and build wealth. He explains that Infinite Banking is not just about buying a policy and letting money sit, but rather a transformation in how wealth is built. By leveraging policies, individuals can have their money do multiple things at the same time and receive benefits from both the policy and other investments.
Nate shares a real-life example of using a policy to fund an investment and highlights the tax advantages and growth potential of policies. He emphasizes the importance of building one’s life around policies and using cash value strategically.
Key Takeaways:
- Infinite Banking Strategy: Nate explores how Infinite Banking allows individuals to have their money do multiple things simultaneously, reaping benefits from both policies and other investments.
- Tax Advantages: Using policies strategically can provide tax advantages and increase after-tax profits, making it a valuable wealth-building tool.
- Policy Loans: Nate explains how policy loans can be used to fund investments or lend money to a business, with the interest paid on these loans potentially being tax-deductible.
- Building Around Policies: The importance of building one’s life around policies and leveraging cash value is highlighted, simplifying wealth building and providing a profitable environment for investments.
- Growth Potential: The growth potential and death benefit of policies add additional value to the Infinite Banking strategy.
Episode Resources:
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LIVING WEALTH PODCAST
DOLLARS AND NONSENSE: EPISODE 220 TRANSCRIPTION
An Introduction to Infinite Banking
Nate Scott [00:09]:
In this episode, I’m going to pull up one of my own policies and share exactly how I use it to fund various investments. It’s going to be an under the hood deep dive into how infinite banking provides the best environment to build wealth and invest money. I’m Nate. I make sense out of money. This is “Dollars and Nonsense”. If you follow the herd, you will be slaughtered.
Infinite banking is not about investing money in whole life insurance policies. And infinite banking is actually a total transformation in how wealth is built.
Nate Scott [00:45]:
But it’s not about just buying a policy and letting money sit. In fact, what we found out, and everyone really knows this deep down, is that most people in my shoes, and the world in general, wants us to put our money into something and let it sit there for long periods of time. And that’s essentially how, whether it’s retirement programs, brokerage accounts, I mean, everybody wants their hands on your money, and they want you to leave it there for a long time, and they want there to be some sort of wall that keeps you from getting it out. And that’s how Wall Street and the government have kind of colluded together to help Americans build wealth.
And I’m not saying it’s the end of the world to do it that way, but infinite banking presents this unique opportunity for your money to do more than just one thing. So instead of putting your money into an account and letting it sit for forever, and the only benefits you get is whatever that account does, instead of doing it that way, you can actually have your money do multiple things at the same time. You can put money into policies and then leverage those policies to go do other things. And all the while, you can receive benefit from the policy itself, and you can receive benefit from whatever else the money is doing at that time, all with the same money.
Nate Scott [01:56]:
That’s why you’ve heard this called maybe the “and asset” or something like that, where mainly what we’re saying is, hey, you can have a policy, you can have your cake and eat it too, you can have the policy, it can be producing value too, and you can go invest money. So in this episode, yeah, I wanted to dive in and pull up one of my own policies. I actually own twelve policies, by the way. Twelve might seem like a big number, might seem like a small number, depending on some of you that are listening to this.
But the idea, by the way, is not that there’s some sort of magic special thing about owning twelve policies, as opposed to just one big one. Typically speaking, whenever you get involved with infinite banking, you start wherever you’re at, with one policy typically, or maybe two, like one on you and one on your spouse or something like that. And you start with one policy and it normally has a natural expansion into additional policies as you go down the line, mainly because you start to become successful financially, you start earning more money. There’s a whole bunch of different things that could take place that would result in more policies being needed to build capital.
Using Policies to Build Wealth
Nate Scott [02:56]:
And as you’re going to see in this lesson, the reality is people want to put more money in once they see the results of existing policies, once they’ve gotten their feet wet, once they’ve started using. Essentially what I’m saying is once you see what’s going on in here, you’re going to say, I could use as many of these as I can get my hands on and put as much money in as I possibly can. So I am going to do this with a screen share, actually pulling up one of my own policies. So if you’re listening to the audio, I’m going to try to speak about it in a detailed way, but you might want to go check out YouTube as well if you want to go take a look at the deeper dive.
So, what I’m going to do is pull up a policy. I’m going to show you, run through an actual example of using this real life policy that insures me to make some investments into the future and really just how that’s going to impact not only your overall return in the investment, but try to take a look at all vantage points in this scenario. So let’s go ahead and dive into the screen share and we’ll get started. So in this policy that I’ve got pulled up here, there’s a couple of columns that we really care about.
Nate Scott [04:02]:
For most IBCRs, what we really care about is the total premium column. That’s the amount of money that’s going to go into the policy and the total cash value. These are really the only two columns we care about. And this is a policy that insures me. It’s a little bit old by now. I mean, by a little bit. We’re in the 6th year of this policy. So I’ve owned this policy for six years and I am putting $30,000 a year into this policy.
Nate Scott [04:28]:
And I hope to put in $30,000 every year for the rest of my life, if I can, into this policy. And maybe I’ll drop the Paid Up Additions rider, of course, at some point. But this whole example is maybe more so to be simple to understand, without going into a whole bunch of complexity of what I may actually end up doing in life, but the reality is – So, here we are. We have this policy. I’ve been putting some money into it for the last six years. It’s six years old, it has $182,000 of cash value, and it has a $1.8 million death benefit as we sit right now. So $182,000 of cash value and $1.8 million of death benefit.
Nate Scott [05:10]:
Remember, the infinite banking strategy is not about using the policy as an investment and just letting it sit there. You are welcome to do that. In fact, I’m about to show you that this policy is doing quite well, whether I do anything with it or not. So, by the way, you are welcome. And we have plenty of clients who, the policy, not only is it the capital reservoir for their life, but they don’t really invest a lot of money in other things. The policies can produce profit enough to where you don’t actually need to make any investments. And remember, as I’m going to bust a couple of myths as we go along, this policy is going to do perfectly fine whether I borrow any money or not. There is no benefit to me.
Expanding IBC Policies As Your Wealth Increases
Nate Scott [00:05:56]:
The policy does not grow faster when I take a policy loan. The policy is going to grow regardless whether I take a policy loan or not, which is huge, by the way, which we’re going to go into. So here I am with a policy that’s six years old. It’s got $182,000 of cash value in it, and I’m going to pay a premium. This policy is due in July, so I’m going to pay a premium. My next $30,000 premium for year seven comes due in July. By the way, we have, six years old. Anytime you can get a policy that’s really past year four or five, it starts to make money and starts to make money pretty quickly as we go along.
Nate Scott [00:06:34]:
So it starts to become very profitable as time goes on. So in this example, I’m about to pay the 7th year’s premium. I’m going to put in $30,000 in July. And you’ll notice the cash value, which is currently $182,000, is about to grow once I pay that premium from 182 to $223,000. So that means that the policy is going to grow by right around $41,000 once I pay this next premium for the 7th year. And I’m only going to put in $30,000. So, of course, third grade arithmetic tells us that if the policy grows by 41,000 and I put in 30, that means I made an $11,000 profit in the cash value coming up this next year, $11,000 tax free. Without me taking any risk whatsoever, I’m going to be pretty happy.
The Benefits of Paying Premiums in Infinite Banking
Nate Scott [00:07:28]:
This is why whenever I try to describe to people, I get excited for premium day. I know some clients who are still getting nervous about paying premiums. A lot of times that’s because they think of premiums as a liability or an expense or an obligation. Because it is a premium and there is a due date on the calendar, they can get stressed about it. I’m just here to say, hey, I’ll take as many of these as I can get. Essentially, if I’m putting in 30,000 and it’s going to grow by 41, I’m going to make an $11,000 profit. This is a good day for me. I’m excited.
Nate Scott [00:08:04]:
I can’t wait. I wish I could pay the premium right now. I wish I didn’t have to wait till July when the premium is due. So what I’m saying is the policy is in a very healthy place, and that’s what you would expect from a policy that’s five, six years old. You would expect it to be in a very healthy place growing very well. But now let’s dive into what it’s going to look like if I start to use this policy and how it’s going to play out as a whole whenever I use this policy to produce investment. And so we’re going to say, come up in year seven. Remember, that’s after I pay my July premium and the cash value grows from 182 to 223.
How To Use Policy Loans for Investments
Nate Scott [00:08:43]:
So it grows by $31,000. We’re going to assume that in year seven coming up here in July, I have an opportunity to invest $200,000. So I’m going to take a policy loan for $200,000 out of the policy. So it’s going to be a $200,000 policy loan. We had $223,000, so we’ve used the vast majority, let’s say, just to keep it simple, though, I use nice, round numbers. So it’s a $200,000 policy loan coming up here in July, year seven. And I’m going to use this policy loan to go make an investment. And I don’t really care what rate of return we use, but I think it’s going to be pretty simple.
Nate Scott [00:09:22]:
If we just said, I’m going to make a 10% return just to keep the numbers simple, so none of this is going to be exact. This is just going to kind of represent an idea with simple numbers. So we’re going to assume I make an investment that’s going to produce for me 10% interest. It’s going to produce for me a profit, which, once again, third grade arithmetic, $200,000 investment at 10%, means I’m going to make $20,000 of profit in this investment.
And what I’m trying to describe to you and use this time to maybe compare and contrast a couple of things. So here’s one thing to note, that in my opinion, using a policy to– building your life around the policies, building your life around infinite banking, actually produces a simple, clear way to build wealth into the future. In other words, to me, it’s very simple. To me, I enjoy this reality, where as I go out in the world, I work, I earn income, I save money.
Nate Scott [00:10:25]:
In other words, I got this premium on one of my twelve policies is $30,000. So I go in the world, I work, I save money. All I do is I put all of that cash flow that I’m saving, what I call free cash flow into policies, that produces this environment, this cash value that’s growing for me with no risk and no tax, inside of this pool of money. So if I have all of my free cash flow going into policies, it’s producing this liquid, guaranteed pool of cash value that I can use for anything I want to at any moment in time. But nonetheless, it creates this simple thing. So, okay, now, all my money is working for me. That’s the idea. All my money is working for me at all times.
The Barbell Investing Strategy in Infinite Banking
Nate Scott [00:11:12]:
And I can pull money from this policy and use it to go achieve bigger things. So, if you guys are familiar with me, by the way, I’m saying I invested at 10%. I personally don’t get out of bed too much for that, by the way, that rate of return, this is just to make the math easy and maybe relatable. If you guys can remember from some of my previous episodes, I’ve talked about the idea of barbell investing, the idea of, hey, I only spend time on either end of the spectrum or the barbell. I’ve got all this money in cash value that’s safe, growing, liquid, tax free. It’s a great reservoir. And I really focus on only putting money into deals that I believe have a very high upside, or almost like, it’s almost like a life changing event if these things work out. Whereas the risk is known, at least I understand the risk very well and is likely to have a low risk of failure.
Nate Scott [00:12:07]:
And so we stay out of the middle which would be like a 10% return, where I do have a whole bunch of risk. Like I could lose money and the most I could make is 10%. I would say I typically avoid those for the most part. But once again, this is, for example, so we’re going to assume we invest 10% into an investment that’s earning 10%. So we’re going to make $20,000 of profit or of income from this investment. Now, if I had not built my life around policies, if I had not been saving money into this policy, and I had instead been using a typical savings account or a checking account to store up my capital, then all of this money, this profit, would be taxable to me, of course. And I’m in the 40% tax bracket, as we sit between state and federal taxes. So I’m in the 40% tax bracket.
The Tax Advantages of Infinite Banking
Nate Scott [00:13:03]:
That means if I was to receive a $20,000 interest profit on an investment and pay taxes on it, I’d really only be left with $12,000. That’s 60% of $20,000. So I’d have to pay $8,000 of tax. So I’m left with 20. So I guess I could do the math differently. 40% of 20,000 is 8000, and that means that’s how much tax I would owe. And so I’m left with $12,000 of net profit. That’s how much money I would have just sitting around investing money.
Nate Scott [00:13:36]:
The typical way inside of a policy, it starts to change things. So remember, whenever you have the policy, you have to think of both and not either or. So let’s pretend I had $223,000 saved up in a checking account, and I didn’t use the policies to do this. I would have taken $200,000 out of that account, which means it’s no longer there doing anything anymore in that account. Of course, now it’s only in this investment, this $200,000. And that $200,000 produces $20,000 of profit. I pay tax on it and I’m left with $12,000. That’s the end of the day.
Nate Scott [00:14:15]:
So it’s simple, I guess. I pretty much don’t have any money in this account anymore, and I only have money inside of this investment. Understandable, right? When you start doing IBC and you start doing infinite banking and you build your life around policies as your capital reservoir, now, you don’t end up with just an investment and pretty much nothing going on in this account.
You actually have a lot of things going on in the policy, because we’ve leveraged the policy using a policy loan. So we’ve used the cash value as collateral to make this investment. And so you actually have a lot of benefit inside of the policy, and you also have benefit coming from the investments. So here’s what we know. We know that right now, as we sit, we would be left with a $12,000 net profit if I used just a checking account or a savings account to do this.
Understanding Interest Payments on Policy Loans
Nate Scott [00:15:07]:
Now, let’s run through the scenario of what I actually have going on to me inside of this policy. So whenever I take out this policy loan, I’m going to have to pay interest back on this policy loan. And right now, depending on the insurance company you’re with, usually interest rates are somewhere between five, 6%, something like that.
Once again, this isn’t meant to be exact. This is really just meant to be an example. So I just think if we used a 5% rate, which right now, it might be closer to 6% for a lot of policies as we sit here in January of 2024, February of 2024, with interest rates where they’re at. But this at least makes the numbers flow very easily and understandable. Very easily.
Nate Scott [00:15:52]:
So we’re going to assume that whenever I borrow this money from the policy, I have to pay 5%. 5% of 200,000 means I’m going to have to pay $10,000 of policy loan interest whenever– I built my life around policies. So, remember, I don’t have $200,000 in a checking account anymore. I’ve built up that capital in policies. My life is built more around policies than it is bank accounts. And so I am going to have to pay interest on this policy loan.
Every time I borrow money from the policy, I have to pay interest to the insurance company in return, though, because it’s a policy loan, all of this cash value still exists and is going to be earning interest and dividends inside of this policy. Now, we could get into a discussion of the difference between direct recognition and non direct recognition, and maybe the pros and cons of each scenario, which is beyond the scope of this episode as well.
Nate Scott [00:16:46]:
But nonetheless, in either scenario, it’s still going to be earning interest and dividends on the full amount of cash value. It just maybe depends on how they’re going to account for the dividend. So I’m not going to get into that right now.
But nonetheless, you are going to pay interest to the insurance company, and you actually kind of become the investment that the insurance company is making. So, essentially, you have this $223,000 of cash value. I do. In this policy. And they have to put that money to work someplace in order to generate a profit, because look at what’s going to happen, by the way, next year.
Leveraging Policy Cash Value for Wealth Growth
Nate Scott [00:17:21]:
So they know that next year, Nate’s going to put in, in July of 2025, he’s going to put in another $30,000 premium, and the cash value is going to grow from 223,000 to 266,000. That’s $43,000 of growth in the policy for that next year. So they say, by the way, if I put in 30 and I get 43,000, that means I made a $13,000 profit. They’re like, we’ve got to put this cash value to work someplace in order to generate the profit needed to help Nate’s policy grow.
And so they’re going to put the money to work in bonds and treasuries and real estate, whatever it is that the insurance company’s got in their investment portfolio. Or you could say, hey, insurance company, I would like a policy loan. Please lend the money to me. I will pay the interest, and you can use that interest.
Nate Scott [00:18:22]:
Of course, I’ll become the investment is the idea, for my own policy. Now, I know that’s kind of simplifying some things, but that’s essentially how it works. They have to put the money to work. Somebody’s got to pay interest. You outrank everyone else when it comes to access to the money. So you can say anytime you want. They like lending the money to you because it’s essentially a risk free loan to them, and you’ll pay back with interest. And if you don’t pay back with interest, they know you’re going to die one day.
Nate Scott [00:18:45]:
So the reason why whenever you take a policy loan, there is no actual terms to the loan, there’s no amortization schedule or things like that. There’s no required payment period, it’s simply because they know that you are going to die someday. And so we call this an interest only line of credit for life. What that means is you only have to pay interest on it once a year at your anniversary date.
So it’s interest only, line of credit means you can pull all of the money out, or any amount you want. You can use it as many times as you want. It’s a line of credit. So you can pull money and send money back just like it would be like a line of credit, which really means you can pull money out and send it back.
The Power of Interest-Only Lines of Credit
Nate Scott [00:19:22]:
Pull money out, send it back as many times as you want to, and interest only line of credit for life, which means it’s approved for life. You can keep it forever, and you can do this type of thing all the way until you die. So they don’t care if you repay because they know that you’re going to die someday, and any loan balance that exists is just going to be paid back by the death benefit.
So let’s go back. I’m getting into the weeds a little bit more than I wanted to, so let’s go ahead and dive back in. So we’ve got this $200,000 policy loan at 5%, which means we’re going to have to pay $10,000 of interest on the policy loan. Let’s rerun this scenario from the vantage point of this exact policy. So in this scenario, what’s going to end up happening is I’m going to make the same exact investment that I did the day before.
Nate Scott [00:20:04]:
I’m going to continue to invest the money at that same 10% investment that’s going to generate me $20,000 of profit, however, because I used the policy to fund an investment. So anytime you use a policy loan to fund an investment or to lend money to your business for business purposes. Now, I’m not a tax professional. This is not tax advice. You go talk to your own accountant. Please take nothing I’m saying as tax advice, because I’m certainly not a tax professional in any way, but nonetheless, from the accounts we’ve spoken with, we believe, and we’ve actually hired some to write an opinion letter of why they believe that this is the case. Using the tax code, we believe that interest that is paid on policy loans used for investment or business purposes is deductible. So the interest you pay to the insurance company is deductible, just like it would have been if you had borrowed money from, like, a hard money lender or a bank to fund this investment.
Nate Scott [00:21:03]:
The same thing would apply that the interest paid on the policy loan, when used for business or investment purposes, can be deductible, just like it would have been deductible if you’d borrowed money from a hard money lender or a bank to make an investment. And so the reality is this $20,000 of profit that we have, let me erase a little bit here just so we can kind of run through the scenario again.
The $20,000 profit that we have, we made the same exact profit, 10%, $20,000 profit. Before we pay any taxes on it, we have the 5% or $10,000 interest expense. So I have to write a check to the insurance company for $10,000, which means that on paper, this investment opportunity didn’t produce for me 20,000 of taxable income.
It only produced for me $10,000 of taxable income, which means, and if I’m still in the 40% tax bracket, so if I have to pay 40% taxes on this investment, that means I’m only going to pay $4,000 in taxes. Remember, without IBC, I had to pay $8,000 in taxes at my tax bracket, and now with IBC, I only have to pay $4,000 in taxes. So far, we’re seeing this tax advantage for using policy, which is fun.
After-Tax Profits: Comparing Your Infinite Banking Options
Nate Scott [00:22:17]:
Remember, by the way, I would do this whether or not the IRS was giving me a tax deduction or not. I would still build my life around policies and I would use it to fund investments and so forth. I’m not doing this for the tax advantage. I’m just saying, yeah, this is just how it works.
So we actually only had to pay $4,000 in taxes because our profit on paper is smaller. So in our checking account, at the end of the day, remember, so this guy had $20,000. The guy who used cash had $20,000 of profit in his checking account. He wrote a check to the IRS for $8,000, and he was left with $12,000 sitting in his checking account .
Nate Scott [00:22:53]:
For us, we had to make two checks from the checking account. Are you with me? We had to write a check of $10,000 to interest to the insurance company, and we had to write a check for $4,000 to the tax man while we’re doing IBC. So really we’re only left with. So that guy was left with, the guy who did cash was left with $12,000 in his checking account.
We’re only left with $6,000 in our checking account per se, because we had to write two checks, one for interest to the insurance company, one to the tax man. And so you would say, well, this sucks. Why would anybody do this? I could have $12,000 when I do cash, and I only have $6,000 left over when I use the policy. Why would I do this? Well, of course, it’s because that’s not the end of the story.
The Real Value of Policy Growth and Death Benefit
Nate Scott [00:23:39]:
Of course. One guy only has the investment and the net profit from the investment. This other guy has the investment and the net profit from the investment, plus all the things that are going to happen internally in the policy at the same time. So that’s where you go in and say, okay, you look back at the policy and you see that the policy is going to grow. It had $223,000 once I paid this premium in July. And the next year is going to roll around. I’m still going to save money. So I’m still going to put in my premium for $30,000.
Nate Scott [00:24:16]:
But the cash value growth is going to be 223 to 266. That’s the $43,000 of cash value growth coming that next year. So here’s what’s actually going to occur. At the end of the day, he’s going to have $6,000 in his checking account left over from the investment. He’s still been saving money, funding his policy, paying premiums, and $30,000 went into the policy.
What we’re really focused on is, well, how much did the policy grow by? So he had to pay $10,000 of interest to this policy, and his premium was 30,000. So he put in a total of $40,000 into the policy over the course of that next year, from year seven to year 840 thousand dollars went into the policy, 10,000 interest, $30,000 was the premium, but the policy grew by $43,000.
Nate Scott [00:25:12]:
So in this scenario, he has $43,000 of new cash value in the policy and $6,000 in his checking account, quote unquote, at the end of the day from that investment. So he actually has a total of after tax $49,000 total has come in. If you did that same scenario with this other guy who’s doing cash, he would of course be saving money too.
So he’s got $12,000 in his checking account from the investment, and he would also have $30,000 of savings. Does that make sense? In other words, in this scenario, we paid a premium and interest. And to compare correctly, of course, we’re going to have to pay this $30,000 of outlay into his checking account. So he’s got 12,000 leftover. The investor guy who did cash and said, this IBC thing sucks, we funded the same investment.
Nate Scott [00:26:10]:
He had twelve grand left over after tax from the investment profit, and he saved $30,000 as well, which leaves him with $42,000 in his account. So we have the investor guy paying cash. He’s got $42,000 left over after all taxes, and he saved the same 30 grand that we paid into a premium. Of course, he doesn’t have a policy. So he didn’t pay a premium with it. He just put it in his bank account, and he’s left with $42,000. We have $43,000 of growth in the policy and $6,000 that’s still sitting in the checking account. So we have a total of $49,000 while doing IBC.
Nate Scott [00:26:46]:
And so what I wanted to share is, this is exactly how I use policies and why I believe that policies are the best place to build capital that’s going to grow for me for the rest of my life, whether I use it or not. But then I can leverage it to go invest in things that make a real impact in my wealth building and financial future. And so this is why we say infinite banking. The policies themselves that are used for infinite banking are not the investment that we’re putting money into to receive, per se. It’s a great place. It’s going to grow, but it’s not the investment. It is simply the banking tool. It’s the business of banking.
Nate Scott [00:27:27]:
Money is supposed to move now, not just for fun, but in other words, money is not locked up. Money is supposed to move and can fund the various things of life. Whenever you understand that, hey, in this policy, we are receiving more benefits. We’re investing into the same things, but we’re receiving more benefit by having the policy enforced. In this case, we made an extra $7,000 tax free. We had 49 grand of leftovers. After all the dust settled while doing IBC, we only had 42 grand if we just bypassed IBC. What I’m trying to bring up, by the way, is this is actually the case for the rest of this person’s life.
Nate Scott [00:28:03]:
That was just one year, by the way. One year of this produced $7,000. You start to compound things over your lifetime, and you’ll see that it really is the greatest environment to build wealth and invest money and springboard into new and better things financially. However, what we didn’t cover is, of course, the fact that whenever you start the policy. So this is just an enforced policy that I own that’s six years old. I have some that are older than this and some that are newer than this. But nonetheless, of course, we bypass the early years of a policy when we’re behind schedule. So, of course, we know that the policy itself is not profitable from day one.
Nate Scott [00:28:40]:
So I had to pay premiums into this policy, and I wasn’t getting all the cash value from those premiums. That’s, of course, being said. However, once you get to this position, every time you make an investment, it can just improve things. The same thing could be said if we use this money to just do more generic things like borrowing money to make a home improvement or something like that, or to buy a car, or these various things of life that you may want control and the ability to fund from policies, it just can improve the scenario. What we also haven’t talked about is that death benefit that’s sitting over there on the sidelines. Not only did I end up netting a profit, partially because of the tax man, and partially because I’ve increased deductions, but nonetheless, I’ve got this death benefit over here of $1.8 million that’s actually going to grow over time as dividends and premiums are paid. As you can see here, over the next 20 years, it grows from 1.8 million to 4.4 million. So what I’m saying is, you have this large death benefit occurring on top of all of this.
Nate Scott [00:29:48]:
That’s just another benefit added into the mix. Not only is it, in other words, you can have your money doing multiple things. It could be. Whenever I borrow money, I have my cash value growing with interest and dividends. It’s tax free. I can borrow against the policy and pay interest back to the insurance company on an interest only line of credit basis. If I use it for business or investment purposes, I can increase my tax deductions for that interest. All the while, the policy is still growing and producing a legacy death benefit for my family, which is a bit different than term insurance, of course, because in term insurance, the likelihood of you passing away during the term is very, very low.
Nate Scott [00:30:26]:
So in whole life policies, they’re meant to be around for your whole life. So the reality is we know that this windfall is going to come, which is very powerful. So with that being said, this is exactly how policies are used. I know it might be a little bit complex to some degree, but one thing that most people miss whenever they are learning IBC is they forget that the policy is producing value, and we’re leveraging it to produce value in other places. And so whenever you run a calculation, you have to compare what life would look like without IBC to what life would look like when built around IBC. So to kind of bring that point home before we close down, some people would come to me and they would say, well, Nate, why would I? Let’s say I had a policy that had $200,000 in it and $200,000 in cash, and there’s an investment that comes your way, and they would look at these numbers, and they would say, well, it seems like I should use my policy to fund this investment, not my cash, because Nate says that the policy produces this valuable position, so I should actually use my policy instead of my cash. And I’m actually saying that’s incorrect unfortunately.
Using Cash Value and Premiums Strategically
Nate Scott [00:31:51]:
Life is simple and it’s much simpler to practice IBC when you build your life around the policies. It doesn’t make sense just to use policies per se, in general, while leaving a ton of money in bank accounts. In fact, if you were that scenario, I would say, yeah, if you use the policy to fund the investment, then you need to make sure to take that other $200,000 of cash and use it to pay premiums in policies over time and start a new policy or something like that to get that money in.
Because what you really want to be in the position of is having $400,000 of cash value and not have a lot of money sitting around the bank account so that all of the investments and different big capital expenses or big capital investments that you have to make are funded from policy cash value. That’s really what you want to build your life around.
I’m not saying that there’s something magic, and I guess I don’t really have time to go into the numbers, but what I’m saying is, if you actually played it out, the guy who has $200,000 of cash value and $200,000 of cash, and he’s saying, well, Nate says there’s something magic in these numbers and tax deduction, I’m just going to use the cash value and sit that 200 grand and leave it in the bank account. I’m actually going to say you’re going to end up worse off.
Nate Scott [00:33:05]:
The key is you have to get the $200,000 in the bank account into policies and let it work for you.
That’s the end goal. So go ahead and use the policy to fund the investment, but do not let that $200,000 in cash sit there. If you’re not looking to open a new policy or move that money in, then just go ahead and use the cash to make the investment. If you’re not going to move it into the policies, at the end of the day, moving into the policy like this, having your entire world kind of built around it, and only leaving in bank accounts the money you need to pay expenses, we call it, have a month or two of overhead expense in policies. I mean, excuse me, in bank accounts and leave the rest in policies. Build your life around it, make it simple, make it very profitable, and then you don’t have to get your ears tickled with all the investments that come your way because you’re like, hey, the policy is doing great as is. I don’t need to throw my money into anything that comes my way. I can be very choosy.
The Simplicity and Profitability of Infinite Banking
Nate Scott [00:33:51]:
I can pick the investments I want to be involved in and benefit tremendously from that. So once again, this has been fun. This is a real example. This is what my life looks like. I’ve got twelve policies. I’m using them for various things, some of them personal. Most of the time I’m using it for business and investment purposes, to build wealth and provide value. And the whole time I’m using it, I’m generating profit inside the banking system and inside of the business and investment world.
Nate Scott [00:34:17]:
I’m getting both things at the same time. That is the beauty of becoming your own banker. Getting into the banking business is having money do multiple jobs at the same time. Thank you guys so much for being here. Once again, if this means something to you, this is valuable to you. If you wouldn’t mind liking our show on YouTube, subscribing to the channel, leave us a comment. Just letting me know. Say “hey Nate, this was great content. I really appreciate it.”
That really helps us know that we’re on the right track. Go ahead and leave us a rating or review on Spotify and Apple Podcasts. It means the world to us. Thank you guys so much for being here. This has been “Dollars and Nonsense”. If you follow the herd, you will be slaughtered.
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