Don’t get me wrong, I see value in infinite banking, but recently a lot of what I have heard and seen on the topic has been lacking some crucial detail, or has even been what I could only assume as, intentionally misleading.
There are 5 really important things that you need to know and be aware of before considering infinite banking for yourself...
In this post, I summarize 5 key misconceptions.
- Rate of Return - what you should actually expect and why it’s way different than what you may have heard from other experts
- Contribution Amount - why not all of your regular savings should go toward this strategy and why most infinite banking experts don’t discuss alternative solutions
- Policy Structure - even the experts will claim they are doing their best and nearly all are blatantly lying or uninformed about how they could provide a better policy for you
- This Isn’t for Everyone - you’ve heard this before I’m sure, but you may not know why and the dangers it can present for the wrong person
- You Pay Yourself Interest - Ha! This one is so far from the truth it hurts
As I go into this if you have any specific questions or want me to go more in depth, let me know in the comments below and I will do my best to provide that for you.
Alright, let’s get started by debunking one of the most universally common and most misleading selling points of the infinite banking concept...
1. Rate of Return
I'm here to tell you that you will actually experience negative returns on your investment.
You may be saying...
- ”What?! No, that’s not true! I was told I’d be getting much greater returns than I could in a savings account!”
- Or, maybe you heard the 4% guarantee plus dividends?!
- Or, maybe you’ve even heard an even more creative (yet still true) 100-400% greater return rate than a savings account.
Though all of these claims alone can be worded in a way that is not technically a lie, they are not the full story.
What’s scary about this claim is that it’s the same one that I, as well as pretty much every other insurance agent, was taught to tell my clients.
But, what I was and what the vast majority of others are still leaving out is that you will only have the potential to realize this type of return in the long run.
In fact, of the hundreds of policy illustrations and dozens of carriers that I have looked through, few policies will net a positive return within the first several years, some taking upwards of 10 years before having more money in your cash value than you’ve put in.
That's right: even with the absolute best policies from the absolute best companies, you'll still have less money available to you than you'll have put in for at least the first several years.
What's worse: if you actually study what the insurance companies are projecting...
A large number of policies won't ever reach the 4%...
Why is this the case?
The cost of insurance. It's unavoidable.
Even with the most strategic structuring of your policy any agent could ever possibly do, the fact that this vehicle is ultimately insurance comes at a cost.
That added cost is immediately subtracted from the funds that are going into that savings portion of your policy.
The savings portion—known as cash value—is what’s earning you the guaranteed 4% plus dividends. Which is why agents can get away with their boastful claims.
The thing is… a savings account does not come with this added cost and hence the way most people present this 4%—or 100% greater—claim is terribly misleading.
In the long run, yes I agree, these policies when structured properly will produce better returns and give you way more options and flexibility than any savings account that I know of today.
That is part of the reason I see a lot of value in them. Just be aware that this is a long term strategy.
2. Contribution Amount
The majority of experts are not talking about alternative places for you to put your money which gives little comparison to evaluate how good this strategy truly is.
When comparing this strategy to a savings account, it may hold up as a much better place for long term growth, but is a savings account really the metric to compare against for growth?
Many of the experts out here on this topic are not securities licensed and have no other investment recommendations and hence see life insurance as the only solution to your needs.
This causes people to take policies for as much premium as they can afford and utilize it as their only place for their savings.
I do believe that in many circumstances this is an incredible place to allocate a portion of your regular savings, even a significant portion; however, for greater upside potential you may want to consider investing some of your savings going into a market-based investment account (perferably one that also protects against downside risk...).
*For more information on how that's done, I'd recommend checking out