Saturday, February 20, 2010
Notes on Privatized Banking Through Whole Life, part 1
Carlos Lara is a businessman in Nashville who contacted me out of the blue back (I think) in late summer 2008. He was a student of Austrian economics and saw on one of my books that I also lived in Nashville. It was Carlos who introduced me to Nelson Nash's concept of "infinite banking," in which a household uses whole life insurance policies as a personal bank. In particular, Nash says that individuals should finance their car and (once they are really into it) home purchases through policy loans, rather than relying on loans from auto finance companies or mortgages.
Carlos and I are writing a book on this, due out in early summer. The more I learn about it, the more I think it's a no brainer for every household where at least one person is still in prime working years to buy at least one whole life policy, as early as possible. In particular, a whole life policy gives people who run their own businesses a lot of flexibility because of the way the tax code works. (Yes, Carlos and I both have whole life policies.)
Given our intentions, it's appropriate that I start laying the groundwork now. Not only will this help introduce you to the (initially odd) idea, but it will also make it easier for me to write my portions of the book.
As this series progresses, I'll tackle specific topics in more depth, and handle some of the typical objections (like "buy term and invest the difference" and "the rate of return on a whole life policy is awful--are you nuts?!"). At this point, let me just paraphrase a point that someone at the IBC conference made to me (and yes I think he sells policies for a living): If Dave Ramsey is right and whole life is such a stupid place to put your money, then why did the government cap how much cash you could put into a particular policy before the tax exemption phases out? If the government wanted to prevent something from being used by super rich people, doesn't that make you a bit curious to explore this thing?
In the next post I'll discuss what a whole life insurance policy actually is. But if you can't wait, try this.
Carlos and I are writing a book on this, due out in early summer. The more I learn about it, the more I think it's a no brainer for every household where at least one person is still in prime working years to buy at least one whole life policy, as early as possible. In particular, a whole life policy gives people who run their own businesses a lot of flexibility because of the way the tax code works. (Yes, Carlos and I both have whole life policies.)
Given our intentions, it's appropriate that I start laying the groundwork now. Not only will this help introduce you to the (initially odd) idea, but it will also make it easier for me to write my portions of the book.
As this series progresses, I'll tackle specific topics in more depth, and handle some of the typical objections (like "buy term and invest the difference" and "the rate of return on a whole life policy is awful--are you nuts?!"). At this point, let me just paraphrase a point that someone at the IBC conference made to me (and yes I think he sells policies for a living): If Dave Ramsey is right and whole life is such a stupid place to put your money, then why did the government cap how much cash you could put into a particular policy before the tax exemption phases out? If the government wanted to prevent something from being used by super rich people, doesn't that make you a bit curious to explore this thing?
In the next post I'll discuss what a whole life insurance policy actually is. But if you can't wait, try this.
Comments:
Hi Bob,
one concern I have with whole life that I'd be pleased if you could address is the sales commissions. Since the product is so often sold--- rather than bought--- these tend to be rather steep.
one concern I have with whole life that I'd be pleased if you could address is the sales commissions. Since the product is so often sold--- rather than bought--- these tend to be rather steep.
Bob,
I second Joe's concern.
Also, to lend (no pun intended) credence to your upcoming conclusion, that Whole-Life is the way to go, I would expect you would invite the likes of Gary North and others to a point by point defense/challenge on the subject.
Let's determine, once and for all, whether whole-life is a good deal, in terms everyone can understand and without subjecting observers to jingos for and against. You do that and I'll buy a whole-life policy.
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I second Joe's concern.
Also, to lend (no pun intended) credence to your upcoming conclusion, that Whole-Life is the way to go, I would expect you would invite the likes of Gary North and others to a point by point defense/challenge on the subject.
Let's determine, once and for all, whether whole-life is a good deal, in terms everyone can understand and without subjecting observers to jingos for and against. You do that and I'll buy a whole-life policy.
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