E157: Easily Make Passive Income and Why You Should Never Fear Retirement

Nate: In this episode, I sit down with Ray Poteet, the founder of Living Wealth, and we discuss how he is using his infinite baking policies to produce passive income, mainly through his lending business, and how that has completely removed the fear of retirement from his life. So let’s go ahead and dive in. This is Dollars & Nonsense. If you follow the herd, you will get slaughtered. All right everyone, welcome back. We got an exciting episode today. It’s just Nate today. And I’m sitting down with our founder, Ray Poteet, a popular guest on the show. So it’s good to have you back, Ray.

Ray: Thank you so much. Looking forward to it.

Nate: Yeah, absolutely. And so we’re excited to have him on. And what we love and what I think our listeners love and the people who tune in is that every time we bring you on, there’s something that you’re actually living out that you can share. So of course we try to do that, but we like to target that type of content whenever you’re here. So living this out, as you brought up even before the show, the idea of retirement is still a concern for a lot of people. How they’re going to fund it. We bring this up in the show a lot. Retirement produce a lot of fear and anxiety in people’s lives, whether they are on track to save enough, invest enough, produce enough income. And then even when they are retired, whether they’re going to outlive their income or not. So a lot of things to uncover today. But yeah, just good to have you back. And where are you at right now, Ray?

Ray: I’m in Poipu, Kauai, Hawaii.

Nate: Yes, I thought so. So you’re living the dream. You got business on top, swimsuits on the bottom type of situation. About to go spend some time at the pool.

Ray: You got it. Amen.

Nate: But all that say Ray, let’s go ahead and dive in. I have some questions to ask, but I thought maybe you could give a rough overview of what you wanted to really focus on in this conversation.

Ray: Well, the main thing I wanted people to realize that the control you have and the flexibility that you have and the lack of concern about what the future holds that I’ve noticed over the last three, four, five years as my age has continued to accumulate, which is normal. And a lot of people ask me, “Well when are you going to retire?” And I’m saying, “Well, I’ve been retired, but I’m doing what retired people ought to be doing and that’s enjoying and sharing life and IBC with people.”

Nate: Yeah, exactly right. And so, one of the things that stirred this was you had been getting asked questions by clients as a concern, “How does IBC result in retirement? That is my goal, no matter what Nate says on the podcast, that’s what I want to do.” How does IBC end in retirement? And you wanted to bring into view not only what the policies are doing, but the fact that you have a large lending business that’s being funded from the policies, both with a lot of loans to family members, let alone loans to all the third party entities that you work with.

Ray: That’s true. And every year, even if I didn’t increase loan capacity, or volume, or dollar amount out there, the amount coming back in continues to increase because of the way the policy works. So regardless of inflation, and we do have inflation, I mean it’s all around us, but I don’t think about it because the increased volume of money that is made possible through the banking system and it’s not taxable just to really blow me away. And as I try to share with people not to worry, that’s not what they have in mind, because they do worry. And I’m trying to bring into the fact that we can take away the fear, take away the anxiety, and really enjoy life to its fullest as we get older and with our kids, grandkids, and great-grandkids.

Nate: Okay, that’s great. I wanted to uncover a few other things too in the conversation really. So right now, Ray, if you were to retire tomorrow, how would your infinite banking system be producing the income? So by the way, spoiler alert, Ray Poteet’s not a man who wants to hang up the hat. I know he’s in Hawaii right now talking to us, but that does not mean he’s living the retired life. Of course, he works harder than anyone else at the office spreading the gospel of infinite banking for sure.

But I think if you could paint a picture for what you mean whenever you say IBC can help alleviate the fear, what is it that you’re living out, at age 75, practicing IBC for almost longer than anybody living right now. And there’d be a very few people who’ve been practicing it longer than you, or as heavily as you, especially by putting it in, implementing it into your life.

I’m just curious what you’re experiencing right now through IBC, having been doing it for 22 years, and what you’ve done with it that produces a comfortable lifestyle based on what we’ve talked about. And then I want to ask some follow up questions to that. So I thought we could start there, and then I wanted to dive in and compare that to what were you expecting retirement to be like before you even found out about IBC?

Ray: Okay.

Nate: And what’s the difference between what you’re doing now, and what you could have done just sticking with the normal things that you were doing. But I wanted to start, instead of waiting until the end, I wanted for the audience to hear from you what would it look like right now? And so they can maybe emulate that with their own systems.

Ray: Well the easiest thing is to just live life and allow things to happen, where previously I tried to control things. You don’t control money, it’s spent when it’s needed to be spent, but let’s just talk about a car or vacation. What I mean by this is we have dollar amounts that come in and we have a tendency to use that same dollar amount for the future. Well I can tell you, especially since our current administration’s in power, that in truth, things have all gone up. And I don’t have to think about, well, do I have to get the ticket today? Do I have to purchase something today and try to make, control it? Almost be in a frenzy about not spending too much.

I know that next year, money will increase through my system, whether I make any additional loans or not, just because of the way the policy works. So I don’t have the concern about will I run out of money that I used to have. And that how much do I need? I don’t know? But I know I’ll have more than the next guy. So the real thing that has occurred is that I don’t think about how much I’ve got to control and accumulate to live in the future as I used to.

Nate: Yeah, and I mean, I guess one thing I would ask is why is that? How did you set it up to be sitting at this place where there’s so much passive income coming in, How’s it coming in? Give us a little bit of an inside look into your financial IBC picture as it sits.

Ray: Well, first of all, I did everything that Nelson said not knowing what would happen. So I’d like to just put a caveat in there and say, I didn’t realize it was this good when I did it, I was just following instructions. But the policies, I use a thousand dollars as a foundation coming in today produces 17, $1,800. And I’m talking monthly. So I’ve got a seven to $800 increase with no taxation from the policies. That money that I got came from me loaning money from the policies, whether it be for investment, car mortgages, house mortgages, or some type of loan that I had made. So the individual is paying me a thousand dollars a month, where that thousand then goes into the policy and it increases, which allows me, because I don’t need the total increase to live to actually take the surplus and create another loan.

Nate: So essentially what you’re saying is right now, not only are the policies growing themselves, but the passive income that’s coming into the policies from the loans, you’re essentially getting almost two streams coming in. So in your example, you made a loan to somebody for a thousand bucks. And so there’s a passive income maybe on a mortgage coming back in of a thousand dollars a month that you could choose to live on. But as soon as you put that into the policy, it’s actually producing growth in the policy due to the compounding of the cash values that are happening underneath all the numbers. And so it’s actually turning a thousand of passive income into a policy to produce 1,700 actually of passive income.

But I’m curious too, as listeners are trying to figure this out. Not everyone’s Ray Poteet, not everyone has enough business acumen or contact to build out a large lending business to third parties. But I think what a lot of people can grasp is, well, we’ve got kids, they got mortgages, they got car loans, they got student debt. Until Biden wipes it out for us. Do you think it would work out real well just doing the family? How much do you have going just with your family, based on mortgages and different things, and car loans you have through them?

Ray: Just within the family, including my own home and various things, and car loans, we have a little over $3 million.

Nate: And what do you think the cash flow from that pool of family loans comes back into you as?

Ray: $27,000 a month?

Nate: Okay, 27,000’s coming back in. You’re thinking to yourself, “That’s not a bad lifestyle.” But all of that money doesn’t just go into a bank account and sit there, obviously, it goes back into the policies. So you’ve leveraged $3 million, approximately, from policies that you own, that you’ve capitalized to lend just to family for all the mortgages and car loans and different things that they’re coming to you for. And they’re all paying back money that normally would’ve gone to somebody. And what do you think that’s producing in the policy?

Ray: Just a shade under 38,000 a month.

Nate: Okay. So essentially, that’s the real figure. You got the 27,000 just by switching hands turns into 38,000 due to the growth of the policies. What I hear you saying is that this concept has taken away the anxiety that you thought you would feel.

Ray: No, I did feel. I did feel [inaudible 00:10:45].

Nate: Well you weren’t there yet, so you thought you would be feeling it when you got there, is what I’m trying to say. Whenever you were planning retirement, the fear of it is starting to dissipate. Because back in the day, I’m sure you were thinking on normal lines, the way that everyone comes into this world thinking that I need to build out a huge big nest egg of money, just sitting around. And you’re going to have to sell stuff out of the nest egg to get the income. So that does lead me to a question I wanted to get from you. How did you envision your retirement looking like from 1970 to the year 2000? How did you envision it? How did you think you were going to fund it?

Ray: Well, I was funding it, because I was in the employee benefit arena. So I had a retirement program, like a 401k. It was called the Defined Benefit Pension Plan that I was putting big money in. And it was my objective to have enough money, when I was 65, to have a 80 to $90,000 a year retirement.

Nate: Were you ever worried that you’d get there, is what I’m trying to figure out. The people we talk to are always worried whether they’re going to get there or not. And even when they’re there, they’re still a little bit worried about whether they actually made it or not.

Ray: And I actually see that, Nate, today with people my age and that, that are concerned that some got there, some didn’t, some are still changing things. And my thought that goes through my mind is I wish I could have talked to each one of them 20 years ago, rather than today or something, because of the change. But while that was happening, while the markets were up, I was a very good person mood wise and everything. When the markets were tanking or going down, I was not a person that you wanted to be around. And it felt like the more I looked at the computer screen, the worse I felt whether the market was going up and down. I realized now it was because I wasn’t in control of things. And I couldn’t change it by looking at it, I had to put my money in and actually trust somebody else with my money.

Nate: I think that’s very insightful. I think that we would like to have some sort of control or some sort of say on what actually happens. We like control, we like being in control as people. We would like to have some say in or some control mechanism in place that would determine our ability to succeed. And that is one of the big complaints that we hear from people who are seeking out other ways to do it, or infinite banking we’ve said many times is the gateway drug that opens up a whole new world of financial independence and control. Most people, it’s the first step towards being more in control as you brought up.

Because so many people I think are really just tired of falling prey to external factors that are way outside their ability to control, will actually be the determining factor in whether they succeed or not financially. And so you’re just saying that was you, you were tired of, “I can save as much money as I want, but if the mutual funds that it’s with and the managers of those mutual funds, or the politicians in Washington, or the economy as a whole, if someone declares war and the stock market crashes, the plan is gone. I had no say on whether or not it was actually going to work out by the time I get to the end of the rainbow.”

Ray: And that’s true. As a family, we had a lot of money going through our hands, but we’re keeping such a small percentage. And today, let’s say the amount of money is the same, but the percentage that is being recirculated and reused is many times greater. And that takes, again, the stress off, because you’re able to reuse money, like a bank does. That’s why we call it infinite banking and personalized banking, because you can do things in a family without trying to have to go to a conventional bank or something to get money to make an idea take flight, whether it’s buying a car, or a swimsuit, or taking a vacation.

Nate: Yeah, I agree with that. I mean, I’ve ran some numbers on my own family and it’s been a while since I’ve ran them. My wife and I, we have three kids already. We’d like to have at least one more. I’m certain my wife wants to have at least one more. Let’s just say we end up with four. I would like to be able to fund all of their mortgages when they’re ready to buy a home. That’s what I’d like to be able to do. So I ran the numbers. I don’t know what a starter home’s going to be like in 20 years when my first one starts to be looking into the market to buy a home. But in 20 years, if a starter home today in the Kansas City area, a good home is 300,000 right now, I don’t know? Honestly I can’t remember, but probably somewhere around there. I was saying it’s probably going to be close to 500,000 at that point.

And so if I’ve got four kids, I need to get up to about $2 million of cash value of capital built up. Which of course, I’m on pace to do that and hopefully blow right past that. But all that to say, that would be my goal. And man, I should have had the, I didn’t know I was going to talk about this, or else I would’ve had the file up really quick. But if I was to do the two million with these boys, then the payment is going to be approximately 12 to $13,000 a month, depending on how much interest I sucker them out of. Let’s say it’s 13,000, somewhere in the 12 to $13,000 a month range on a 30 year note to dad. First off, that’s not a bad passive income, just from the family. But then if you consider the fact that I’m going to roll that cash flow into policies over that 30 year timeframe, the total amount of value that it’s going to produce in the policies to me is going to be closer to about $9 million over that timeframe.

So in other words, they’re going to put in 150,000 times 30 years, that’s 12,000 a month times 30 years is 150 grand. So they’re going to give me about 4.5 million in mortgage payments that were going to go to somebody anyway. And I’m just going to take the 4.5 million, roll them in through my policies. The cash value that’s going to end up sitting there after 30 years is going to be more like $9 million of, and so possibly more. I was kind of low balling those figures.

Ray: That’s pretty low I would say.

Nate: I was assuming the policies were not going to be doing that good over that time, and I’d be happy. But all that to say, I’m thinking to myself that’s a totally different mentality than I’m going to put $2 million in a mutual fund and hope for the best. It’s a different idea. And actually, to me, produces a more fulfilling way to make money. It’s not like I’m gambling. It’s not like it’s just funny money that may disappear. It’s like, “Hey, my kids need financing. I would like to be the bank. I would like for them not to have to see the bank, unless we want to.

And I’d like to be able to have their mortgage payments bring value to me and the family. And then, of course, when I pass away, anything that’s left, which is obviously going to be a lot, is going to filter back down to them.” And I’m thinking this sounds more fun to make a lot of money, it sounds more fun and fulfilling than, “No kids, you’re off on your own. Go deal with the banks. I’m just going to sit here, invest money in the stock market.” Wouldn’t care for that.

Ray: It’s a family function, and I haven’t done as well as I would’ve liked. But I enjoy the way our family comes together in a financial deal and realize keeping money in the family means it can be recycled over, and over, and over. And I can tell you that, yes, here’s the first loan or here’s the first house, and we did it with a daughter. Well she’s in their third house now. Each one we’ve taken over has been easier each time. Even though the dollar amount where it was a $206,000 house the first time, the last time it was 670, a house in between there. The same is true with the other children.

So the deals that we have been able to pull off, realizing yes, they’re amortizing a loan, but all the money, interest and principles, staying in the family is great. And teaching them how money works is great. And that it stays there so that they can benefit. And so the legacy, my wife and I will be able to leave, Nana and Papa, is so much different than we anticipated. And we don’t really think about it. It’s supposed to be for the family. Whereas before you’re hoping, “Well this is left, or I got something here I can do…” I don’t even go through those thoughts anymore because it’s all family. And that’s what God really wanted was the family to benefit from your efforts of work and knowledge.

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Nate: So why do you like the end game retirement scenario through IBC, through having practiced infinite banking, what would you say are the reasons you’ve enjoyed it so much and you gravitate towards it, as opposed to the more conventional planning that you were used to promote and practice yourself?

Ray: I would say, first of all, it’s taught me how the game’s really played and where I thought I knew the rules [inaudible 00:21:37] previously, I really didn’t. And so it allows me to make and take advantage of situation because of understanding what the end game is, where it really is. Because being the bank, I control the payments, I control the amounts, I control the interest rates for my children and grandchildren, and being able money that they’re going to spend just staying in the family.

And as a child of parents, I love my parents and if I could have helped them by making all the car payments that I had and mortgage payments that I made, I would’ve been happy to pay them, rather than the bank. But that thought had never ever came into our mind because of the programming that went on. Now that is not the situation that currently occurs. My grandchildren come and ask me if they can get a mortgage or buy a car and I love that. And we sit down, we talk about it as a banker, but also as a grandfather. And just trying to put knowledge into them and let them grow from this experience to realize they’re going to get some efforts from their labors, which before it was just going to somebody and gone and the only way to get it back was to go out and earn it again.

Nate: Again. Well it’s certainly really powerful, and as I brought up, I’m not there yet, Ray, but I foresee what it’s like and I’m enticed by it through just the family loans. And obviously, Ray, that’s not the only thing you’re doing IBC with, having done a lot of different investments and deals and huge loans to people who are not family members. But what I’m hearing is, even if you didn’t want to do any of those, just the family economy, staying true to the family itself, and utilizing each other’s money to pay back to each other, that’s enough. Now anything else is just fun money.

Ray: Right. And I would agree totally. We have three daughters, nine grandchildren. Three great grandkids. Pretty much a normal sized family, maybe a little big, maybe a little small, just depends on who you talk to. But I would say within our family, I know one car has already been bought. Two cars this year within the family. So even to just have two family members fund cars based on our models, that’s huge. Well it’s not unusual, like two years ago we had five cars. And that’s not unusual with the other words, we’re just buying cars. I mean, Nate Scott bought a car. Okay, why? He didn’t like the other ones, so he got [inaudible 00:24:21]. Okay, big deal.

Nate: You got to. You got to do what you got to do. But I’m not using you anymore Ray.

Ray: No.

Nate: Maybe I should, but I [inaudible 00:24:30].

Ray: But it’s still family, you’re family. It’s staying in that, whether it’s the Scotts, or the Poteets, or the [inaudible 00:24:41]. Doesn’t matter. The family unit. Whether individually you practiced banking and the control and you enjoyed it and was able to make those decisions. And as you pass that on to your children, my great-grandkids, the wisdom of how this can work and keep families actually above water during weird economic times and not struggle or stress, is well worth it.

Nate: I think you brought up an interesting insight in some ways too, that as the family, as an entire unit starts to practice infinite banking, the amount of legacy that’s being created, if every generation buys into it. For mortgages and different things like that, you own my first mortgage, but then I didn’t need you for the next house, because my system was large enough to handle it myself. All that to say, as a family progresses in time, there’s this huge abundance that’s being created, not only during the infancy stages where everyone’s just going to be using the patriarch’s money. Presumably the patriarch oftentimes has more money. They’ve been around the longest. That’s not always the case. But oftentimes that is the case.

Ray: Until right now, I forgot about your house. Actually, they’re on castle. You don’t think about it as a family unit or what’s going on. I don’t care which family unit benefits from it, as long as the family unit can use and benefit. [inaudible 00:26:10].

Nate: Well, the patriarch would only really need to be used in the scenario while the younger generations are building their systems, with the goal being they would only end up using the patriarch’s money for the bigger, bigger, bigger items as time goes on.

Ray: Or you can actually take the family units and pull the money together for major loans and really make things happen.

Nate: And different investment opportunities to pull together the family and get money working together for different things other than just inter-family loans. But that was the main gist you wanted to get across in the episode was that, “Hey, Nate, if all we could do was share with people, there’s a lot of money in the family in children and in grandchildren and those types of generations that they’re going to be going to banks for. And if you can commit to capitalizing your system to have enough capital to handle a lot of these things, then the passive cash flow coming back into you can produce a lot of income without having to count on any sort of external factor to support the income streams.” It’s just the family supporting each other and profiting from each other, kind of old school. And the thing about old school stuff is, they oftentimes work.

Ray: Yes, it does work. I’m first generation, my children are second, grandkids are third that we got it in, at least at my level now that it can be passed on onward is just, it’s exciting to watch the day that Pania gets his first car, or graduates and gets another car, or buys the first house, or meets his bride. All these things that can be done within the family unit. And families spend money, but it’s the recapturing of the money they spend and reusing it is really the key and the fun part of it, because you don’t have to go out and earn it again to use it again.

Nate: Yeah, because it’s money you’re going to spend anyway.

Ray: Right.

Nate: And I think sometimes we try to paint pictures of IBC, we don’t want it to sound too magical. It’s logical, it makes sense. And so we don’t want it to sound, but it’s almost hard to, we’re so used to things, they’re so ingrained in us, like the perspective of once you get older, you don’t want to be dependent on your parents. And rightfully so. But we’re saying that there is a way for families to work together that can benefit everybody in the family. No one’s really given much thought to banks have kind of filled the role and it’s hard to explain what life is like practicing IBC in a way that people can grasp, because I always like to say, Ray, that there’s hard money, and soft money benefits of IBC. There’s the obvious hard money, analytical, numerical calculation-driven numbers on a screen style benefits that exist inside life insurance policies and how they’re growing and what you can do with them.

Nate: But then there’s the stuff as we’re bringing up the soft side, which is what does life look like while you’re practicing it? And do you enjoy the way life looks like practicing it more than the old way of doing it? In which case, for most people who’ve been practicing for any period of time, and practicing it, right, of course. Some people have no idea what they’re doing. But besides that, if you practice it the right way, no one ever looks back and says, “I wish I hadn’t become my own banker. I wish I didn’t have a growing pool of capital that is fully accessible to me at all times. I wish I was never in a position to fund my kids’ mortgages.” And it’s hard to get across the soft picture without sounding almost salesy, per se.

What Nelson Nash envisioned when he wrote the book and when he created the concept was not just purely data driven benefits, though of course he added those in throughout his book that he wrote throughout this presentation. It was a lot of emphasis on the soft benefit of IBC, the ones you don’t exactly put on a piece of paper. And sometimes that gets lost in translation. I’m super analytical, as you know, Ray, that was one of the reasons we had some bickering early on where I was like, “Now show me the numbers.” And obviously, here I am loving IBC. The numbers are incredible if you give them a chance to show themselves for what they actually are meant to show. But I guess what I’m trying to bring up here is, it took me practicing the concept to become a believer in the soft value that was hard to put on a spreadsheet.

Ray: And it’s hard to explain the soft value until you’ve done it. The hard numbers are easy to explain. They’re hard. But the soft numbers, I share the example, you can’t learn to swim without getting in the water. Well you can’t learn IBC without practicing it. You can just talk about it. It’s no different than anything else. It’s [inaudible 00:30:50] putting it into practice and living it, and watching how it changes your life.

Nate: That’s right. It has the potential to change your life. It really does. And that’s not an exaggeration. Sounds like we’ve spent too much time around the campfire drinking the Kool-Aid, Ray?

Ray: Well we have, but it’s-

Nate: We have.

Ray: … good Kool-Aid.

Nate: It’s good. It tastes great.

Ray: I’m going to keep drinking it.

Nate: Whatever they’re putting in it, let’s keep it up.

Ray: Yeah, it’s good.

Nate: But that was actually the whole agenda, was not, it wasn’t just, “Hey, whole life insurance policies can be used to finance things of life. Let’s show everyone the numbers and prove to them that it’s a better way.” While Nelson’s book, of course, did that on the technical side of things, what he actually envisioned and what the whole movement envisions is actually just a change of perspective on money in a lot of ways, and a change in how you act in a lot of ways. So it’s meant to have a lot of soft value. It’s meant to attract the people who want the lifestyle that it can provide, is essentially, I guess what I would say.

It produces a way of life in someone if you want to practice it. Now, you cannot even want to live that and still practice IBC because the numbers are good, but it really attracts the people who not only want the value numerically, but also the value of this is a way of life. I just want to be my own bank and this is the best way to do it. I never even thought I wanted to be, but the amount of control and different soft value that can come from, it is the way of life that it teaches you to run.

Ray: Amen. Amen. I agree totally with that.

Nate: Anything else, Ray?

Ray: Just to ask people to listen to what was said, may God use it to bless you and help you move forward.

Nate: Exactly. Amen. Well, I mean, to sum it up, Ray, there is something unique about IBC that as someone who spent 30 years in the conventional financial planning world to then switch over to IBC, you’ve noticed a drastic change in the idea of what retirement could be, and how it can be funded, how it can be financed, and the level of control you can have over the end result. And IBCs been the driving factor between that producing a life where you’re not worried about it anymore. And I think everyone can see that. Now I’m sure there’s a lot of ways to do it, and we’re not saying we have the only way per se of feeling secure, financially, but it’s a way that’s tried and true that works and that you can be quite in control of, which is quite powerful.  I hope you guys enjoyed the podcast. Give us a like, give us a review. That’s how we get the word out to more and more people. That’s how the algorithms like us. And so we really appreciate all of our listeners. This has been Dollars & Nonsense. If you follow the herd, you will get slaughtered.

Announcer: With that, we wrap up episode number 157 of Dollars & Nonsense. Get show notes, transcripts, and other resources by visiting livingwealth.com/e157. One last thing before you go, start your journey towards financial security and wealth today. Visit livingwealth.com/beatinflation. You’ll gain instant free access to the beginner’s course, Ray, Nate, and Holly made just for you. Again, that’s livingwealth.com/beatinflation.