Any Experience with Bank On Yourself or Infinite Banking?

[LGilmore]

The BTID guy is making the assumption all risk is equal.

And that past returns will be future returns.

I'm not a fan of BOY either by the way.

 

[Guest]

The BTID guy is making the assumption all risk is equal.

And that past returns will be future returns.

I'm not a fan of BOY either by the way.

I guess I'm now the "BTID guy"?

I'm not assuming anything. I am speculating that historical market performance is indicative of future market performance. Really that is the only barometer that we have to measure the future stability of the market. In the past 100 years we've learned that the market and economy are cyclical. We will have our ups and our downs. Our recessions, depressions, and times of great prosperity.

Selling the BOY system as no-risk (which most of us probably know someone who sells CV life insurance as no-risk) is flawed. There is risk with CV life insurance, just as there is with the stock market. As I said earlier, I believe there is more risk because you are putting all your chips on one bet, instead of diversifying and spreading your risk out.

 

[2112Greg]

OK, just so I make sure I understand what you're saying. You're going on record by saying that there is an equivalent amount of risk by being wide open in the market as there is inside a guaranteed WL product.

But not just that, you're saying that it's even RISKIER than being in the market.

If this is the case and you are indeed going to stand by your post there, I'm giving up posting in reply to your posts because you've lost whatever credibility I had granted you.

 

[Tahoe Ray]

I guess I'm now the "BTID guy"?

I'm not assuming anything. I am speculating that historical market performance is indicative of future market performance. Really that is the only barometer that we have to measure the future stability of the market. In the past 100 years we've learned that the market and economy are cyclical. We will have our ups and our downs. Our recessions, depressions, and times of great prosperity.

Selling the BOY system as no-risk (which most of us probably know someone who sells CV life insurance as no-risk) is flawed. There is risk with CV life insurance, just as there is with the stock market. As I said earlier, I believe there is more risk because you are putting all your chips on one bet, instead of diversifying and spreading your risk out.

I agree with most of this statement (aside from some wording and with the fact that you're not the BTITD mascot)...

I'm not a huge stock market fan. That being said, just as economic conditions effect the stock market, they also effect the general accounts of insurance companies. Carriers lag interest rate changes significantly and things could very likely get worse before they get better with regards to dividends and the "current" columns of some of these products.

The big question is this: Is your life insurance premium payment a substitute for your 401k contribution or is it in addition to it?

Most people pay their life premiums w/ their checking account and pay their retirement account with their paycheck. Two very different mentalities.

If a client is willing to do both...now you have a savings plan.

 

[Guest]

OK, just so I make sure I understand what you're saying. You're going on record by saying that there is an equivalent amount of risk by being wide open in the market as there is inside a guaranteed WL product.

But not just that, you're saying that it's even RISKIER than being in the market.

If this is the case and you are indeed going to stand by your post there, I'm giving up posting in reply to your posts because you've lost whatever credibility I had granted you.

Okay, one more time.

In my opinion it is a better investment strategy to invest your money in well diversified market funds (funds that include stocks, bonds, money markets, etc). Not only when market is on a swing, but persistent investment over a 30 to 40 year period. Every month, regardless of the current market situation you continue to put your $300 (or however much) in your market fund. This is called dollar cost averaging. When the market is up, your dollar buys less shares, when the market is down, your dollar buys more shares.

Yes, I do believe it is riskier to buy a WL policy than diversifying yourself in the market. When you put all of your money into a life policy with ABC Insurance Company you run the risk of that insurance company becoming insolvent. Is it likely that this will happen? NO!! But there is a greater chance of one insurance company becoming insolvent than there is of a hundred different investments all wrapped up in one package going bankrupt.

I don't know why this single concept is even a discussion. Are you telling me that if Client A has all of his money in one single WL policy and Client B has his money diversified over 100 or 500 different stocks, bonds, etc that Client A has undertaken less risk? Tell that to the folks who had policies with Executive Life, Equitable Life, and HIH Insurance (those are the ones that quickly come to mind).

An insurance company may be rated AAA+++++ in 2013, but how will they be rated in 2045? Its hard to tell.

All investments have risk. It is unlikely that the major life insurers are going to go out of business. But if they do, you've lost everything.

In the event we have another stock market crash, your stocks do not just disappear, they just diminish in value. Over time the majority (again, diversification is important) will begin to regain their value.

With all due respect, this is Economics 101. Its the 'putting all your eggs in one basket' theory.

 

[sman]

OK, just so I make sure I understand what you're saying. You're going on record by saying that there is an equivalent amount of risk by being wide open in the market as there is inside a guaranteed WL product.

I can't speak for Dubya, but I didn't read his post to mean "wide open in the market". He clearly has mentioned being diversified. Secondly, there are different kinds of risk associated with investing. While being in a diversified portfolio has its risks, so does investing solely in a whole life policy. They are just different kinds of risk.

 

[VolAgent]

I'm not assuming anything. I am speculating that historical market performance is indicative of future market performance. Really that is the only barometer that we have to measure the future stability of the market. In the past 100 years we've learned that the market and economy are cyclical. We will have our ups and our downs. Our recessions, depressions, and times of great prosperity.

Not pointing fingers at you, but this has to be the biggest single hypocrisy of the investment world. They constantly talk about past performance so you will assume they will perform the same going forward, then show a nice little disclaimer at the bottom disavowing the entire ad.

 

[unlimitedsigh]

Okay, one more time.

In my opinion it is a better investment strategy to invest your money in well diversified market funds (funds that include stocks, bonds, money markets, etc). Not only when market is on a swing, but persistent investment over a 30 to 40 year period. Every month, regardless of the current market situation you continue to put your $300 (or however much) in your market fund. This is called dollar cost averaging. When the market is up, your dollar buys less shares, when the market is down, your dollar buys more shares.

Yes, I do believe it is riskier to buy a WL policy than diversifying yourself in the market. When you put all of your money into a life policy with ABC Insurance Company you run the risk of that insurance company becoming insolvent. Is it likely that this will happen? NO!! But there is a greater chance of one insurance company becoming insolvent than there is of a hundred different investments all wrapped up in one package going bankrupt.

I don't know why this single concept is even a discussion. Are you telling me that if Client A has all of his money in one single WL policy and Client B has his money diversified over 100 or 500 different stocks, bonds, etc that Client A has undertaken less risk? Tell that to the folks who had policies with Executive Life, Equitable Life, and HIH Insurance (those are the ones that quickly come to mind).

An insurance company may be rated AAA+++++ in 2013, but how will they be rated in 2045? Its hard to tell.

All investments have risk. It is unlikely that the major life insurers are going to go out of business. But if they do, you've lost everything.

In the event we have another stock market crash, your stocks do not just disappear, they just diminish in value. Over time the majority (again, diversification is important) will begin to regain their value.

With all due respect, this is Economics 101. Its the 'putting all your eggs in one basket' theory.

Honest question(s):

Are there any examples of that happening? What about reinsurance? What about contractual obligations and corporate ratings? What about reserves requirements and a heavy ('investment' grade) bonds held as assets? What about the FDIC equivalent, the insurance state guarantee funds?



And, like mentioned, what about the tax treatment of LI over typical gains when making a true apples:apples comparison to retirement income streams??

 

[Guest]

Honest question(s):

Are there any examples of that happening? What about reinsurance? What about contractual obligations and corporate ratings? What about reserves requirements and a heavy ('investment' grade) bonds held as assets? What about the FDIC equivalent, the insurance state guarantee funds?

And, like mentioned, what about the tax treatment of LI over typical gains when making a true apples:apples comparison to retirement income streams??

Roth 401k is tax free up to $5000/$5500 per year. Growth, disbursements, and contributions if taken after 59 1/2. Granted, you can take loans from WL and UL and repay yourself interest. But we are talking retirement.

Examples: see previous post for life insurers going insolvent.

Guarantee Association in my state only guarantees up to $100k in cash value and $250k in DB.

Reinsurance... Many companies only use reinsurance if face amount is over $1M.

I don't want to beat a dead horse. I think someone said it best earlier in this thread when they said WL and stocks can co-exist as a retirement plan. Probably the best advice we can all give to our clients.

 

[unlimitedsigh]

I see.

So what happened/happens to their policies?