770 accounts: why the mystery?

You may have seen something floating around the internet about secret 770 accounts.  I haven't done a lot of research into that, but based on the claims presented, I'd bet that if you sign up for more information that you'll find the 770 account is really just a whole life insurance contract structured exactly as I've described for an infinite banking policy.

Again, the reason to choose to bank for yourself is that:

1. It's tax-free
2. Allows you complete control of your money
3. Pays a competitive interest rate
4. Provides a way for you to pass wealth from generation to generation

What other vehicle gives you a benefit whether you live or whether you die?

Another way to use your bank

So, here is another thought.  Let's say you want to get started in Infinite Banking, but you don't want to commit too much.  You like to save for your next car and not get loans.  That's pretty smart, but let's say that you plan to purchase a new car in seven years and you have $5K currently saved and you are saving $3K per year.  Let's also say that you plan to buy a new car every nine years.  I know that's a long time for some people, but if you are a disciplined average American, that's not bad if you buy a $15,000 to $20,000 used car and drive it for a while.

You sign up for a dividend paying whole life policy from a mutual life insurance company that has annual premiums of $3,000 and you add the $5,000 in paid up additions.  You age and other factors will determine the amount of the death benefit and exactly when the policy capitalizes.  However, you should be able to take out a loan from the policy by the end of year seven.  The exact amount will depend on your policy and the amount of dividends, which will likely be small at this point.  You then will continue saving for your next car as well as paying yourself back.  So, you'll need to pay the $3,000 premium as well as begin paying back the loan.

Depending on a number of factors, you may not have to pay back that first loan, perhaps not even the second, depending on your goals.  For your infinite bank, it is essential that you pay back the loan for each car, but the good news is that you may not have to, depending on how much you loan yourself.  As long as you continue paying premiums, it's like that you can keep the policy active and still have some death benefit.  How much will depend on a number of factors that I can't predict without knowing your exact situation.

However, once you get past that first car and as long as you keep paying premiums and pay back at least part of your loans, you will almost certainly make more money than you would by saving in a CD or a money market account PLUS you will have a death benefit.  The death benefit may be small if you do not pay back all or most of your loans, but you will have something.

While the real purpose of setting up your own bank through a dividend paying whole life insurance contract is to build wealth over time tax free, the contract can be used almost exclusively as a savings account that lasts forever--forever because you can pass this on from generation to generation if you teach your children and grandchildren how this works.

As a caveat, the idea I've outlined here would need to be illustrated properly by a knowledgeable life insurance producer who is familiar with a knowledge of how to create your own bank.  That illustration would take into account your age and health and your own financial situation.  This example is not meant to constitute specific advice for you, but only to generate ideas for using your policy as your bank.

Another idea for Infinite Banking

So, you've built up or you are building up a safety reserve, probably in a money market fund or set of CDs.  Why not take that money that is earning almost nothing and put it into a specially structured whole life policy.
Advantages:
1. better interest rate by far over time.
2. a death benefit that can be incidental to your savings.

Considerations:
1. If it's truly a safety reserve and you don't plan on using it, there is little risk to having to liquidate it in the early stages of the policy.
2. If you need money, you can always loan it to yourself without closing an account or selling a CD.  And the death benefit stays in force less the money you've withdrawn.

Seems like a pretty good strategy for most people.

Infinite Banking: Why?

Some of my friends are interested in Infinite Banking, but wonder why they should do it.  It's not right for everyone.  It requires discipline, it is for the long term, and if understood correctly as a way to both pass wealth to the next generation and teach the next generation how to manage money, it's a great tool that does better the longer you work with it.  Here are some factors to think about

1. You or your financial adviser can always generate a situation that is better than Infinite Banking.  However, you are not comparing similar investments.  While IB is not an investment because it is really a life insurance product, that's part of the point.  There is almost no risk.  The good life insurance companies that a knowledgeable producer would use have been around over 100 years and paid dividends that whole time.
2. Using a well funded whole life policy and not just an off the shelf whole life policy allows you to have greater cash value sooner so that you can borrow against the policy. The greatest value from such a policy is if you use it for your cash needs and not just let it sit, so it's almost impossible for a traditional financial adviser to show you a true comparison.  The more you use the cash, the better your real return is.  
3. The death benefit becomes almost simply an added benefit, but an important one for the next generation.  You may not "need" life insurance after you turn 65 or so, but why not provide for the next generation or the one after that (or the one after that).  Of course, you can always leave it as a legacy to a charity as well.  
4. The life insurance doesn't have to be on yourself.  You can buy it on a child or a grandchild.  It's cheaper insurance and you still have the use of the cash while providing what could be a substantial benefit to the next generations.
5. I've heard of producers who will write their wills or trusts such that the beneficiary is required to put the proceeds into another similar policy so that the benefits continue generation to generation.  

These are just a few ideas.  The possibilities are almost limitless and can apply to almost anyone who can fund a whole life policy.  The benefits may not be immediate, but they are tax-free, almost guaranteed, and can be passed down from generation to generation, and you have control of your money.