A step by step plan to start decentralizing your banking activities using Whole Life Insurance.

A step by step plan to start decentralizing your banking activities using Whole Life Insurance.

The concept of becoming your own banker is based on the idea that your savings and/or retirement could be better used inside a whole life insurance policy. This strategy has multiple advantages that I pointed out in [my book review]( Book Review: What would the Rockefeller’s Do?) called What would the Rockefeller’s Do?” A book that explains how the Rockefeller’s used this concept to preserve their family fortune, while most rich families lose most of the wealth accumulated by the person who becomes a multi-millionaire within three generations.

This is the nuts and bolts or just the facts guide to get started once you have educated yourself on this Strategy.

Step 1 –
Buy Whole Life Insurance
You must take out a whole life insurance policy on yourself or, you can take out and control a policy on someone close to you to be your own bank with. This is called STOLI (stranger-owned-life-insurance).
This usually only works in these circumstances:
• Child
• Spouse
• Grandchild
• Business partner
• Key employee
You should buy your policy from a Mutual Life Insurance Company (as opposed to a stock insurance company). This is critical since mutual companies are owned by policyholders and share their profits with Whole Life policyholders in the form of dividends.

Step 2 –
Add riders to increase cash surrender values to useful levels quickly.
You need these to make that sure your Whole Life policy includes there two key riders:
1 Paid-Up Additions (PUA) Rider: this is a vital ingredient to increasing the amount of cash value in the first year.
2 Term Insurance Rider: You need the term rider to bring down the cost of the total death benefit needed to support the amount of cash value you want to build up with in the policy. It also increases the amount of Paid-Up Additions you can buy in the early years, which can also help your cash value grow faster.

Step 3 –
Pay more into the policy then the premiums due.
You pay additional premium above the amount required for the basic coverage to increase the cash value because 90-95% of this “over funding” goes to cash value.
You should pay up to the limit the IRS allows and still allow tax free compounding.

Step 4 –
Borrow money from your insurance company to payoff higher interest debts Your cash value never actually leaves your policy even when you take a loan and “borrow against” it. This means:
A. Your cash value is always earning compound interest.
B. You repay the loan, usually at 5% simple interest or less.

You can access your cash value inside your policy one of these ways:
1 Withdraw your cash value or…
2 Borrow against your cash value using the guaranteed policy loan feature for maximum flexibility
3 Pledge the policy as collateral to an outside lender, use if their rate is less then insurance company.
Remember you are not borrowing the cash value, your entire cash value base continues growing within your policy, including the amount you borrowed.
Your cash value never actually leaves your policy even when you take a loan and “borrow against” it. You see, the insurance company is happy to give you a loan out of their general fund because they’re always holding your cash value as collateral.

Step 5 –
You pay back the loan at terms favorable to you.
Here are some of your options for repayment:
• Pay principal and interest on a schedule you make.
• Make interest-only payments
• Pay nothing until you can pay the entire balance at once.
• Pay nothing and have the death benefit pay off the loan at death.

Remember these key points.
1 Your cash value usually earns a better interest rate then a savings account or certificate of deposit.
2 The growth as well as any lifetime distributions aren’t taxed as long as some small amount of whole life insurance death benefit stays in force until the insured passes away.
3 When you borrow rather than make a withdrawal, your full cash value continues growing inside the policy despite any loans you have against the policy with the insurance company.

✍️ by Shortsegments

If you want to learn more I suggest:

Reading “What would the Rockefeller’s Do?”

Read “Killing Sacred Cows” nothing to do with cows, that’s an American idiom for proving long held beliefs false.

Becoming your own banker.

Read references at www.wealthnation.com