Any Experience with Bank On Yourself or Infinite Banking?

[Tahoe Ray]

You missed the point. It is ok, everyone does and that is why investors never get average returns.

Why did the market go down? People were busy selling. They were locking in their losses. Why did the market go up, they were busy buying.

The average investor has shown time and time their desire to buy high and sell low. That is why the market can return whatever it wants, the average investor will never see it. The market may have averaged 9%, but most investors didn't.

This has been proven time and time again.

Now, I'm not going to research this for you, as I don't care if you do BOY, BTID, or JOAB. I'm not here to convert anyone's investment philosophy. As I told the OP in the beginning, BOY or Infinite Banking can work for you, just don't believe it doesn't have flaws.

I'm personally more in favor of some diversification. Max out your IRA or 401k and buy some CV life insurance.

Bang. That is where the story can get really compelling...

To be fair, the OP did use 6% in his example. If the average is 9% and he estimates 6%, over a 30 year time horizon that does not seem inappropriate.

Also, once we're within 7-10 years of tapping that nest egg, annuities do provide some of that downside protection.
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You still missing the point.

It isn't about people looking for short term gains. It is about human nature. The market goes down, they get scared and pull out, the market goes up they get greedy and invest. Just watch the flows into stock funds versus bond funds. It is almost always contrary to what people should be doing.

No one is going to put $500/mo into mutual funds and get market returns. Human nature will kick in and side-track the plan. Of course, putting $500/mo into a WL policy can be side-tracked just as easily.

Here is what I think you're referencing:

 

[VolAgent]

Thanks Tahoe. As I said, I'm not interested in converting anyone, so I wasn't go to research links to support my points. I just went off memory.

And that penalty is pretty severe when you look at it.

 

[Tahoe Ray]

Thanks Tahoe. As I said, I'm not interested in converting anyone, so I wasn't go to research links to support my points. I just went off memory.

And that penalty is pretty severe when you look at it.

No problem. FYI that's the Dalbar study...they put it out every year. It is normally used to illustrate the whole "time in" the market vs "timing" the market...FWIW

 

[xrac]

Guardian is an excellent company.

There are advantages to the WL policies that BTID's tend to overlook.

Market averages are just that averages. The investor who gets in an out of the market at the wrong time will earn substantially less than the average. Most private investors enter the market at the wrong time and leave the market at the wrong time.

Market averages do not tend to consider costs or the effect of taxation on trades if in a non qualified account. If money is in a qualified account the impact of compound taxation is not considered.

In investments one does not have complete access to the money without penalty. If you are invested in exchange funds, stocks or mutual funds and you need to access your money and the market is down at that time this is a problem. If I sell a stock and have a $1,000 gain that amount will be reduced by whatever the trade costs and tax rate (short or long term capital gains) is at that time. If the money is in a qualified account I am going to pay a penalty of 10% plus my going tax rate bracket unless I am 59 1/2, etc.

The biggest failure of BTID for most people is they buy term and spend the difference. WL is a type of forced savings to keep the policy in force.

 

[VolAgent]

No problem. FYI that's the Dalbar study...they put it out every year. It is normally used to illustrate the whole "time in" the market vs "timing" the market...FWIW

Yep, as soon as you said the name, I remembered it. There is another one, in a typical year, there are like 10 days that yield most of the return. Some years even fewer days. If you missed those days, you missed most of the return of the market that year.

 

[2112Greg]

Your post shows that you don't really understand market trends and historical rates of return. That's ok, you're an insurance agent, not an economist or investment banker. As for my 'very conservative 6%' it is just that, conservative. From 1933 to 2012 the return on the market (adjusted for inflation) was just under 9%.

Please don't try to sell your clients on the idea that WL with PUA is going to be a better long term investment than a good, well diversified mutual fund. Because if you are doing that, then you are lying to your client. History show us that the market is very resilient and provides substantial growth over the long term.

Not only that, but you still have a large risk exposure with WL insurance. You are gambling your money on one company. What if that company becomes insolvent? With a well diversified mutual fund you are spreading your risk out among a hundred or even a thousand different companies, doesn't that sound a little safer than one single company?

If someone wants to buy WL because they do not want to be exposed to the volatility of the market, then that's fine. I have no problem with that. Different types of risk are suited for different types of individuals.

I just ran an illustration on myself... This is a WL with PUA, face amount is $150K. Annual premium is $2400.

With the WL at year 35 the face amount has grown to 316K and the CV is 151K.

Had I taken that same $2400 per year and invested in that 'conservative 6%' my balance at year 35 would be $286K.

I would love for someone to tell me why I'm wrong. (that sounds sarcastic, but I really don't mean for it to be) I truly I want to get more excited about WL insurance.

Might work better if you turn down the haughtiness factor by a bit. Just a suggestion.

I may not be an investment banker, but I do understand certain concepts. Not that it matters, but I'm formerly S7 an S66 licensed, though I don't provide those services for clients any longer. The fact is that you have no idea who my clients are, where they come from and what they do for a living. So, there's no need to for you to tell me what I should or shouldn't be saying to them. I stand by my comment that using average market performance is a poor illustration tool. The problem is that there aren't many very good ones, especially when you're talking about mutual fund performance.

The other guys have demonstrated pretty clearly, on top of my hypothetical example, that average rates of return are a poor way to illustrate performance of a product. You have to have the perfect storm of an investment strategy to obtain top of the market results...year after year after year after year.

I'd hazard to guess that no rank and file investor has that kind of time, energy or expertise. Period.

On the WL you've run for yourself, did you just plow everything in the death benefit or did you add a PUA rider to contribute directly into the CV? That makes a difference to the performance of the policy, especially if you want to use it primarily as a vehicle for cash accumulation and the DB is of secondary imporance.

The other thing you're missing here, respectfully, is that the CV is accessed without tax consequences. Or should I say, without the same tax consequences that gains the market are taxed. A WL policy is a far more favorable place tax-wise. And who know what the tax rates will be in 35 years. WL works beautifully for people with pensions (many of my clients) and big 401(k) or 403(b), 457 and/or TSP plans.

I've never suggested having only WL as a retirement strategy. It should part of the portfolio.

Again YMMV

 

[Guest]

Might work better if you turn down the haughtiness factor by a bit. Just a suggestion.

I may not be an investment banker, but I do understand certain concepts. Not that it matters, but I'm formerly S7 an S66 licensed, though I don't provide those services for clients any longer. The fact is that you have no idea who my clients are, where they come from and what they do for a living. So, there's no need to for you to tell me what I should or shouldn't be saying to them. I stand by my comment that using average market performance is a poor illustration tool. The problem is that there aren't many very good ones, especially when you're talking about mutual fund performance.

The other guys have demonstrated pretty clearly, on top of my hypothetical example, that average rates of return are a poor way to illustrate performance of a product. You have to have the perfect storm of an investment strategy to obtain top of the market results...year after year after year after year.

I'd hazard to guess that no rank and file investor has that kind of time, energy or expertise. Period.

On the WL you've run for yourself, did you just plow everything in the death benefit or did you add a PUA rider to contribute directly into the CV? That makes a difference to the performance of the policy, especially if you want to use it primarily as a vehicle for cash accumulation and the DB is of secondary imporance.

The other thing you're missing here, respectfully, is that the CV is accessed without tax consequences. Or should I say, without the same tax consequences that gains the market are taxed. A WL policy is a far more favorable place tax-wise. And who know what the tax rates will be in 35 years. WL works beautifully for people with pensions (many of my clients) and big 401(k) or 403(b), 457 and/or TSP plans.

I've never suggested having only WL as a retirement strategy. It should part of the portfolio.

Again YMMV

Really wasn't trying to sound haughty, that's why I even apologized for it in the post.

I understand the point you're trying to make, I just have a difference of opinion. I guess I come from more of a Ramsey-esque frame of mind.

Sorry to the OP for hijacking your thread.

 

[xrac]

Really wasn't trying to sound haughty, that's why I even apologized for it in the post.

I understand the point you're trying to make, I just have a difference of opinion. I guess I come from more of a Ramsey-esque frame of mind.

Sorry to the OP for hijacking your thread.

Ramsey is all the time talking about a 12 percent average return. Dave Ramsey may be a lot of things but certainly has a lot to learn about investments.

 

[VolAgent]

Really wasn't trying to sound haughty, that's why I even apologized for it in the post.

I understand the point you're trying to make, I just have a difference of opinion. I guess I come from more of a Ramsey-esque frame of mind.

Sorry to the OP for hijacking your thread.

As best I can tell, Ramsey has failed at everything BUT telling other people how to live their lives. I'm not sure following his advice would be high on my list.

Also as Xrac points out, he preaches unrealistic returns on the market.

 

[2112Greg]

Don't even get me started on Ramsey.