ShawnBrooks
Expert
- 25
I have studied this extensively, can't find any "holes" in it. Seems like the company that offers the whole life policies with PUA riders (paid up additions) is Guardian. comments anyone?
Any Experience with Bank On Yourself or Infinite Banking?
- Thread starter ShawnBrooks
- Start date
- 15,041
If you can't find any flaws, then you haven't studied it enough. There is no perfect plan. Also, tons of companies offer policies with PUAs. Mass Mutual, NYL, Ohio National are just a few.
Note, I'm not saying BOY or Infinite Banking are bad, I'm saying they are perfect and have weaknesses just as any system does. You simply need to determine if its strengths are worth it and can you compensate for the flaws to your satisfaction.
Note, I'm not saying BOY or Infinite Banking are bad, I'm saying they are perfect and have weaknesses just as any system does. You simply need to determine if its strengths are worth it and can you compensate for the flaws to your satisfaction.
I assume you meant "aren't"?
- 15,041
Thank you. (20 characters)
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There are plenty of flaws in the concept. I read the book and, although it is interesting, there are other ways of doing the same thing.
I'll probably get banned from the forum for this, but I'm a 'buy term and invest the difference' kind of guy. If you just do the math it works out so much more in your favor.
Take me... For a $250K WL with PUA on me it would be about $325 a month.
At 65 years old a WL policy would be worth (according to the projections on the company I'm looking at now) $247,044. If you invested that money and got a very conservative rate of 6% per year, which is below the average rate, you'd have $465,346 at 65 years old.
I read the book wanting and hoping to find some new great idea that would help me educate my clients and really get excited about permanent insurance, but it was not to be.
The concept of the book is to use WL insurance as a way to finance cars, boats, vacations, etc. and pay yourself back the interest. But if you just save money you can pay cash for those things and not have to finance them.
- 795
Six percent is "very conservative"? Where on earth are you getting THAT??
You're also confusing average rates of increase, which does not take into account the swings in the market and how those swings impact the actual portfolio performance in real dollars.
I couldn't care less if you're a BTITD kind of guy, it takes all kinds. But you need to understand math better if you're selling investments on "average rates of return" because you're not being honest with your clients.
In general, I support the concept of BOY, etc. Is it perfect? Of course not. But selling on 'average rates of return' is worse.
Here's something that I got from one of the books on being your own bank. It illustrates the concept with such clarity that it's undeniable...
Year 1 market is +100%
starting balance 10,000 ending balance 20,000
Year 2 market is -50%
starting balance 20,000 ending balance 10,000
Year 3 market is +100%
starting balance 10,000 ending balance 20,000
Year 4 market is -50%
starting balance 20,000 ending balance 10,000
This is an average rate of return of 25%, but you started with the same amount of money that you ended up with...and probably be less because of sales charges, commissions and the rest of it. But you've still seen a 25% average increase.
You're also confusing average rates of increase, which does not take into account the swings in the market and how those swings impact the actual portfolio performance in real dollars.
I couldn't care less if you're a BTITD kind of guy, it takes all kinds. But you need to understand math better if you're selling investments on "average rates of return" because you're not being honest with your clients.
In general, I support the concept of BOY, etc. Is it perfect? Of course not. But selling on 'average rates of return' is worse.
Here's something that I got from one of the books on being your own bank. It illustrates the concept with such clarity that it's undeniable...
Year 1 market is +100%
starting balance 10,000 ending balance 20,000
Year 2 market is -50%
starting balance 20,000 ending balance 10,000
Year 3 market is +100%
starting balance 10,000 ending balance 20,000
Year 4 market is -50%
starting balance 20,000 ending balance 10,000
This is an average rate of return of 25%, but you started with the same amount of money that you ended up with...and probably be less because of sales charges, commissions and the rest of it. But you've still seen a 25% average increase.
That is an arithmetic average. When you quote investor performance, most use a geometric average (which in your example, would be 0%). This average is typically 1-2% less than the arithmetic average looking at the S&P throughout varying points in history.
Not saying that 6% is right or wrong, or that BTITD even works (as I have seen many just spend the difference) but extreme examples like the one referenced are just silly. They also don't take into account the ability to tweak an allocation based on age/time horizon.
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2112Greg said:
6% is low. The average return of the stock market since 1980 is 9.52%. The average return since the end of World War 2 to 2011 was just over 8%. I have all the stats at my office, or you can just google it. This includes the 29% loss in 2008.
Or you could just use this handy calculator...
CAGR of the Stock Market: Annualized Returns of the S&P 500
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Very handy.. Thanks! Greg seemed to think I was pulling numbers out of the air.
BOY isn't anything new. PUA have been around for years and years. Yellen has done nothing new, she's just marketing something that's been around forever in a new way.
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