Welcome to the MyForeverBank Factory! This is where we begin to put together your customized MyForeverBank, your own bank. First, we are going to take a brief tour of the machinery that builds MyForeverBanks, and then in the next lesson we’ll take a look at one of the MyForeverBanks that come off the assembly line here, and finally, we’ll introduce you to the MyForeverBank Simulator that we are going to send you home with.
The MyForeverBank Simulator will equip you with the tools to try out different versions of MyForeverBanks while you decide which one best suits your needs.
How to Work This Course
This Bank-Free Banking course uses a hands-on approach to the concepts and workings of MyForevderBank – the bank that attends to your banking needs without helping to build the tallest building in town. I introduce you to the vocabulary of the Infinite Banking Concept (IBC) in The Industry Vocabulary and show you how it works in the present lesson.
Infinite Banking (the name used by its most famous advocate, R. Nelson Nash in his book) now has several names: “Be Your Own Banker”, “Cash Flow Banking”, “Bank on Yourself”, “Cash Flow Banking”, and “770 Account” (referring to the IRS provisions for whole life insurance), all of which point out various aspects of the method. I first learned of the idea because John Ward, a provider in Massachusetts, had read Nash’s book that quoted my writings and looked me up.
I recommend that you begin this course by reading through The Industry Vocabulary, which unfortunately, is a little like eating sawdust. But the good news is that it only takes 10 minutes to consume it and you get a good introduction to the concepts that make the system work. But if you prefer, you can certainly dive in right here and take this tour of the MyForeverBank Factory. If you are already familiar with financial concepts and life insurance, keep on reading right here.
The Tour
We begin the tour by reading this summary of whole life insurance, the investment instrument that is the primary engine of the money making machine I call Bank-Free Banking.
Whole Life Insurance Policy – In summary: a type of life insurance policy typically having the following attributes: fixed amount premiums are paid as long as the insured lives, constantly increasing cash value, dividends (refund of premiums) that represent passive income, and a fixed amount death benefit.
In detail: a contract between a person or other entity and a Life Insurance company (carrier). The carrier sells its services and its guarantees to the buyer (hereinafter called the owner). The owner is obligated to make payments (premiums) to the carrier, and the carrier is obligated to perform certain financial services, including a death benefit upon the death of the insured person (not necessarily the owner). The other financial services include the following: a steadily growing cash value that is available to the owner in the form of policy loans, reduction of the death benefit, or reduction or elimination of premiums, refunds of previously paid premiums (dividends), and withdrawals. Withdrawals reduce the cash value but loans and reduction of the death benefit do not.
Notable characteristics of Whole Life Insurance:
- Guaranteed Growth & Stability
- You get guaranteed cash value: some policies guarantee growth. You own a contract not a stock.
- The cash value does not decline during stock market downturns.
- Some whole life policies guarantee dividends.
- DIvidends can be applied to reduce premiums and can even pay them entirely.1
- Loans & Accessibility
- The cash value can be used as collateral for loans so the interest rate is low.
- Cash value loans preserve the cash value and maximize dividends.
- You can withdraw money from the cash value instead of using it for loan collateral.
- You can withdraw or borrow against it. You own it. There is no application process or credit check.
- You set the repayment terms.
- You can choose not to repay the loan or part of it. The “penalty” is reduction of the death benefit.
- Flexibility
- The insured and the owner may or may not be the same person. You have choices.
- Cash value can be withdrawn piecemeal during retirement to provide a tax-free income.
- Unlike 401(k)s or IRAs, there are no restrictions or penalties for accessing your money.
- Unlike 401(k)s or IRAs, there are no limits on how much you can put into your policy.2
- A Paid Up Addition Rider lets you increase cash value and death benefit anytime you want to.
- Dividends
- “Participating” whole life policies pay dividends.
- Dividends can: give you cash, decrease premiums, increase cash value, buy higher death benefits, repay policy loans, or pay you interest.
- Hedge Against Inflation
- Whole life insurance premiums never increase.
- Borrowing against the cash value means you pay low interest.
- The tax advantages help offset inflationary disadvantages.
- The cash value growth of Universal Indexed Life Insurance is tied to the market as a direct hedge.
- Tax Advantages
- Tax-free dividends – because dividends are actually refunds of premiums paid, they are not taxable.
- Tax-free growth: Cash value growth is not taxable.
- Tax-free death benefit: Beneficiaries receive the payout without income tax liability.3
- Riders Let You Customize Your Contract
- Disability Waiver of Premium and Chronic Care riders pay your premiums when you can’t.
- Purchase Paid-Up Insurance lets you increase cash value and/or death benefit when you want to.
- Living Benefits can give you a monthly income if the insured becomes terminally ill.
- Accidental Death rider can double the death benefit – a good hedge for the bread winner.
- Protection
- Cash value and death benefits are protected from bankruptcy and creditors in many states.
- Premiums cannot be increased by the carrier.
- Provides for Free Inter-Generational Transfers
- Because the death benefit is not taxable it can transfer wealth without loss.
- Because you can direct the death benefit to any heir, multiple policies give you infinite choices.
- The MyForeverBank concept includes perpetuating itself across generations through a Family Office.
1 This depends on the success of the carrier’s investments of premiums.
2 If a policy contains too much cash value, the policy may be re-classified by the IRS as an investment rather than a life insurance policy.
3 If the named beneficiary receives the policy death benefit in a lump sum.
A MyForeverBank Example
This example will show you in detail how a Participating Whole Life Insurance policy could work for a 35-year-old, non-smoking woman with average health and 3 children. (I choose to use the “participating” version of whole life because it pays dividends but it also has somewhat higher premiums.)
The MyForeverBank Simulator
Using AI
He writes from a background as a family man (raised ten children) with degrees in Physics, Mathematics, and Business. HIs vocation has been mostly Engineering and Financial Business, Accounting and Banking software. He is a Christian, a Philosopher, and an Author writing mainly about rights and government. He lives off-grid most of the year in the tops of the Rocky Mountains.
- Fundamentals of Finance - February 19, 2025
- How to Be a MyForeverBanker - February 19, 2025
- Cost of Capital - February 17, 2025
