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December 18, 2010


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Josh, Jake & Nick, And again... how exactly are the three of you related?

@ Jim. Around year 1 the cash value is roughly around 50 percent of the money you have put in. The percentage will get higher and higher and by year 5-7 it will be around the same value as the amount you have put in. At that point the bank is capitalized fully.

I am not going to discuss commissions online, that is very unprofessional. It's very little though. You can call an insurance company and ask them about it if you really want to.

There are many different insurance companies you can use. However, we choose to use insurance companies that understand the Becoming Your Own Bank concept.

Jim--josh, jake and I work together. we all help people implement this system in their personal situations. I think I speak for all of us when i say that we don't want to try and explain this concept via a comment thread any longer. If you truly have interest in learning please give one of us a call and we'll be more than happy to show you the exact numbers and explain in detail why so many people use this system.

I appreciate the response this post has received, aside from those who slammed the idea without knowing the facts.


What I'm hearing is that if I put $25,000 into a policy then in 1 year I'll have $12,500 cash value (roughly) but in 5-7 years I'll have $25,000.

Why is it unprofessional to discuss commission rates? Is that a secret or something?

Can you maybe at least give an example of one of the insurance companies that you use? If people are investing in insurance then they want to know about the company they are buying. If this really only works with certain companies then that matters.

If I wanted to do this then what would I do? Does your book detail everything I need to know? Or do I have to pay for a service too?

@Dew Drop
"Apex has his head in the sand.....must be an old fashioned Dave Ramsey follower. You go your way and I'll go mine. I know for a fact I'll win with a secure finacial retirement plan. How much have you made in the market over the past 10 yrs?"

I'm not Apex but since 12/18/2000 the annual compund percentage rate of return on my investment portfolio at Fidelity Investments has been 8.07%. I'll ask you the same question you asked Apex. Care to answer?

Thanks to the recently passed inheritance tax law and the raising of the net worth threshold value for a couple to $10M I still have no need for life insurance in order to pass my estate on to our children or for any other reason I can come up with.

Old Limey, my dividends have averaged 6.9% tax free over the past nine years. My effective tax rate is 34%......figure it out. I'll have a ton of money by the time I'm 65. I can BORROW the yearly dividends....again tax free.....and pull out a 6 figure income for life. Look into non direct recognition mutual life insurance companies; you earn dividends on borrowed balances....this is what makes the process work. I'm not trying to sell or convert anyone. I'm only concerned about my family and the comfortable lifestyle I'll live in retirement and the multi million dollar chunck of tax free money I'll leave my estate. If you take the time to research you'll understand how, and why, the system works. There's several books and learn.

Jim, one last thing i wanted to say, because you seem to be hung up on how much agents get paid for these policies. Again, and i know this isnt' what you want to hear, it depends on the agent and whether they are independent or working for an agency, and how much business they write on an annual basis. Let's just say that in your previously mentioned "pretend example" I would get a percentage of the annual base premium - which would be around $1,500-$2,000. Had a sold you a typical whole life policy I would have received a percentage of the entire $5,000 annual contribution.

I have no problem telling you how much I make, it would just be much easier to assess your situation if i had more facts.



I looked at the illustration you provided. Thank you for providing some numbers.

A couple things before I get into the illustration. It is clear that both you and Josh are affiliated with the author of this article. The illustration you sent me to is affiliated with your same company. That's fine. I just want it to be clear that you are not three independent voices. You are all on the same team. I don't know who Richard is, he probably isn't associated with your team.

Second in the illustration the numbers used were the projections not the guaranteed values so those numbers may not be how the policy turns out.

However the guaranteed numbers were also listed there and they were not that much worse. Given that, I will freely admit that the numbers in that illustration are far better than I expected or have seen in typical permanent life insurance policies. I saw that they were pulled from what looked like a real illustration sheet For Mutual Trust Life , part of Mutual Trust Financial Group, neither of which I am familiar with. I cannot verify that those are real numbers because I can't seem to find any place on the interest that posts their illustrations that are easily accessible to the public. Would you be able to point me to an insurance website that actually lists policy illustrations for verification?

I am still not sure that I would want my money tied up in those life insurance policies. I also note that the projections assume no loan is ever taken from the policy (I saw that the MTL projection sheets specifically stated that). My understanding is that this changes the projections if you take a loan and so it would be instructive to understand how that changes the results.

Furthermore the death benefit was jumping by huge amounts. The premiums were 20K and the death benefit was going up by 75K each year. This started with the first year and continued pretty much every year there after. I am quite baffled by this. Can you explain how this is possible and funded. I understand there is a large additional paid up insurance rider on this contract (base insurance is 7K and the rider is nearly 13K). Clearly this is being used to fund the higher cash value portion and changes how the policy performs. So I need more than an answer like this is a high cash value policy. I need to understand how this is funded. The insurance company who sells the insurance absolutely has to take in more money than it pays out over time or it will go broke. You obviously know this. So I am trying to understand how the policy can offer the ability to surrender it after 5 years and get more than all the premiums paid in back and yet pay a death benefit that continues to grow by 55K more per year than the increased money put in in premiums. This is also why I would like to be able to verify these projections.

As you can see, I am trying to give you the benefit of the doubt here and see if this can work. The numbers are much better than any permanent life projection I have ever seen. So much better that I am having a hard time believing them. That's why I am asking for an explanation of how the insurance company funds this and a place that I could go verify that an insurance company actually could sell me a policy that did exactly as this projection and doesn't have any hidden catches I am unaware of.



One small clarification, when I said the insurance company has to take in more than it pays out I don't mean just in premiums but it return on the premiums as well. If the company takes in 500K in premiums on an average policy and gets returns of 1 million on an average policy then it cannot pay out more than 1.5 million in benefits on the average policy (and that would assume zero costs which we know can't be true, you get paid something when you sell the insurance after all). So as to how the policy is funded and can continue to increase the death benefits at the rates that it does, that question is to understand how the company can fund that considering premiums and return on premiums that they take in.

@Jim: You are my hero. Your joke about Josh, Jake and Nick being in a family business followed by Josh ADMITTING that they are in business together was priceless. It feels like this whole site has been hijacked by oily life insurance salesmen. This thread stinks like rotten fish.

Jim's comment at 5:54 p.m. on Dec. 19 hits the nail on the head. It asks for specific details applying the "infinite banking" concept to a specific set of facts. This is a simple request that you would expect your life insurance agent to be able to accomplish in a meeting. The fact that the life insurance hucksters respond to Jim's comment with only vagueness and evasion is telling. Talk about revealing the emperor without clothes.

@ Josh: You said " requires quite a bit of explanation to get the mind out of traditional thinking."

For future reference, when you directly quote an author - in this case David Koresh - it is appropriate to include a citation.

@FMF: I assume this guest post was intended to challenge your readers to spar with scam artists. I will give you the benefit of the doubt for now and await your future comment.

@ Kevin. So true. I mean good work pointing this all out to everyone. Who knew that if you wrote a guest blog post on a blog, that your colleagues would get on and try to explain the concept to others and back you up. I mean who would do that?

And I think we have responded to every question that has been asked, and more.

And what is this scam thing all about? I'm sorry to inform everyone who thinks this is a scam... but the numbers are there, and the results are proven.

@ Old Limey. I still don't think you see the benefits. Let me ask you this. How long will 10 million dollars last?
Now ask yourself how much 10 million dollars would last if you had the money stored in an insurance policy, you borrowed from yourself, paid yourself back, died, and left the death benefit, a huge chunk of money, to your heirs tax free? Much more.

Then your kids do the same thing, and their kids, and their kids. A significant difference. This is wealth creation.

All --

There are many different thoughts on how to handle money (debt versus no debt, spending versus earning, index fund investing versus pick your own stocks, and on and on.) And while not popular with some, the issue discussed here does have a group of followers that is not inconsequential. Since this site is about the discussion of personal finance topics (whether you or anyone else finds them popular or not), it was run.

Kevin --

If you look up the word "scam", here's what you'll get (from

–noun -- a confidence game or other fraudulent scheme, esp. for making a quick profit; swindle.

–verb (used with object) - to cheat or defraud with a scam.

I believe that using the term "scam" to talk about investing/borrowing in life insurance is inaccurate. I don't think it's fraudulent, a swindle, or used to cheat or defraud.

Is it an option that has limited appeal (only viable for people in specific circumstances)? Yes. Is it an expensive way to accomplish a particular goal. It is, in my opinion. Is it something I do personally? No. Is it something I recommend for most people? No. Is it a viable personal finance topic that deserves discussion? Yes. Is insurance used by many wealthy people for both saving/investing as well as estate planning purposes? Yes. Is it a very complicated issue? Yes. Are all people "selling" this method honest? No -- just like all people selling anything else are not honest. Is this "group" that wrote/commenting here honest? I don't know. I've never worked with them. But I usually give people the benefit of the doubt until they prove otherwise.

But is this a personal finance topic, whether you like it or not, that's worth at least discussion (even if that discussion only leads you to find "I never want to do that in my financial life")? Yes, I believe it is. And to call it a scam is, in my opinion, very, very inaccurate.

All (again) --

We discuss many unpopular ideas here on FMF. In the past I've taken heat for suggesting people move to save money, that people don't have pets because they are expensive, that people should be debt free (yes, even no mortgage), that you can't time the market, and on and on. My commitment is that I will keep bringing up topics, whether you like them or not, whether I like them or not, that I believe are at least worth discussion. This is one of them. You may agree or disagree, but my philosophy has always been that everything is on the table unless it's illegal, immoral, etc. and I certainly don't think that the above falls into this category.

And before anyone asks, no, I did not and have not received any compensation for running this post and I do not have any business or personal relationship with the author or commenters.

@ apex, thanks for taking the time to look at the illustration. a couple will not find an insurance website that lists illustrations. First of all its the agents job to provide you with an illustration and secondly there are too many variables for a company to simply post an illustration on their site.

When you say you don't want your money "tied up in life insurance" you are confirming the fact that you are still not understanding fully how this type of policy works. If you put in 20k per year for 5 years you will have access to just about all of your money...within a couple hundred dollars in most cases. after 5 years your cash value and death benefit continue to grow because of the rate of return of the policy and riders added to the policy.

If there is still so much doubt in your mind that this does not work, then maybe it's best that you don't use this system, maybe using a savings account is a better option for you. But if you really wanted to I'm sure you could call mutual trust and talk with them about the thousands of people that use their policies as banks.

last thing...I appreciate your skepticism, because this does, at times, seem too good to be true. But the numbers are there, I can run an illustration on your current situation and be able to show you the guaranteed results and the projected results, aside from talking to someone that implements this system (many have chimed in on this thread) I'm not sure how else you'll be convinced.

@FMF & Jake, Josh, Nick.

I would have much preferred to see this post be upfront about what the system is. The original post is couched in a story about the "system" giving results that are misleading and not revealing anything about what is behind the system.

The post claimed that by doing this system I could buy a truck for 40K and pay 8K in interest to myself and be 68K ahead instead of 28K behind if I didn't use this system. This is some very bad math. Saving paying the 8K in interest to the bank can't put one ahead by over 90K. Thats very misleading.

Not telling me that this involved putting in cash for 5 years into a life insurance policy and then borrowing that money out is misleading.

These are the types of tactics that I find so slimy and misleading.

Now what I liked in the last post by Jake was that you showed me an example illustration that I was not aware existed. As a policy it performs far better than any permanent life insurance I have ever seen.

Why couldn't you write a post that talked about your system and then disclose that its life insurance based but state that while you understand many people are rightfully leary of life insurance plans that there are many bad life insurance products that are sold to people but a properly structured plan can keep nearly all of your premiums in cash value after 5 years. That because of how it's structured it's far less lucrative for the agent which helps most of your premiums go to the cash value of the policy. Admit like you have just above that this policy might have slightly less cash available to you than if you put it in a savings account. Then talk about how in the long run you will be getting all your savings in a vehicle that will be tax deferred and tax free at death. That's really the benefit of the system. That's an explanation I would explore.

But instead you are leading people to believe in some kind of amazing 68K gain versus 28K loss which is not remotely true. You are talking about paying interest to yourself versus the bank which is a diversion because you would have had the cash you put into the premiums so you wouldn't be borrowing from the bank (but you don't disclose that either).

As you admitted above you would have ALMOST as much cash in this policy as if you put it in a bank. In that sense, it is almost as good as putting it in a bank. You get two other benefits. Added death benefit which you may or may not want and tax deferred savings and tax exempt growth at death which may be important for a wealthy client but may not be for a moderate income individual.

Because of the illustration it is something I may examine some day if I have a lot of wealth that I need to protect from estate taxes, etc, if I can verify a policy that performs as you have laid out. But aside from the tax benefits at death, there is no magic here. Just a policy that keeps most of your cash safe with a small amount of overhead cost to run the policy. And that's all a valid thing to do in the right circumstances.

The slick approach to promising far more than it can do and being misleading about the life insurance policy behind the system is the type of approach I just can't stomach. I don't know if I could ever buy a policy from a person or firm that sold it to me in the fashion being sold here. I don't think I would trust them to have my best interest in mind when they have to mislead me until they can get me to think differently than traditional thinking. I don't want to be given half truths until I am ready to accept "the truth". If it's viable, I can be convinced of anything when the facts are all put on the table. You just have to get me to give you a fair shake, and I will. I think my change from thinking the life insurance plan you were selling was a complete rip off to being mostly ok with the underlying insurance policy should prove that. I can see that the illustration provided performs pretty well. It just doesn't do what you promised and doesn't provide any extra gain other than tax savings. But it is still a viable vehicle for tax planning other than typical whole life which is mostly a rip off.

Maybe you have found the misleading approach is the one that has the most success with people. If that is true, I don't respect your methods. Perhaps that is why I always see it pitched that way. Maybe if it was pitched more honestly, those of us that were skeptical would not call you charlatans for the way you sell it.

@apex, I'll keep my response brief, I'm glad to hear that you have come around to understanding that becoming your bank is anything but a scam. As far as the way the system was presented in the first place, it would take pages and pages to explain the logistics of everything involved, as you can see by the length of this thread, providing the most concise explanation of the concept was my goal. I'm not in the business of writing blog posts that are 50 pages long.

It's true the this is not an easily explained concept, but understand that 99% of the people that come to us already understand we're using life insurance, they have gone out and done the necessary research to know that we're not scamming them, so that is rarely an issue with our clients.

I guess i got a little longer than intended here...anyway, its not feasible to explain every intricacy of the system in one blog post, we're not trying to deceive anyone - you're right, there really is not a whole lot of "magic" here, the system works based on self discipline and sound financial principles. I encourage you to continue to research this concept and try as hard as you can to discredit it, I've been trying for a very long time and still haven't had success. it works.

Apex --

Hate the player, not the game... ;-)

As you know, the same main principle discussed here (borrowing from yourself) is given by others as a reason for borrowing from 401ks. Not saying that I agree with it, just illustrating that the principle is more widespread than many people think.

Unrelated to life insurance:

* You can specifically benefit from the tax write off of interest on a loan to yourself. If you have an LLC or Corp, you could loan the money to or from the other entity, and the entity paying the interest could write it off. You could probably do it as a Sole Proprietor, though I have not tried that. The receiving part would have to declare it as interest paid, usually at a lower dividend rate, and thus the savings.

* If you fund the LLC periodically with personal funds, like a lot of people do, there are some benefits if it structured as a loan. Instead of it being income to the LLC, and thus taxed, the LLC gets to deduct the interest paid as a loan. And when the LLC starts making money(hopefully), you can take money out by treating it as repaying the loan, the payments being deductible to the LLC and the payment not being taxable income to the individual.

* With the new tax law just signed, you could buy the truck in your LLC, with a loan from your personal. The LLC can depreciate 100% of the value in the first year!

I'm not recommending anything shady, talk with your CPA, these are fairly common strategies for small businesses.

I understand this is quite different than what you thought. That being said, I reemphasize what FMF says. The point illustrated here was unrelated to insurance in the first place. This was financial advice that had to do with BANKING. Be it in a savings account, 401k, IRA, shoe box, or insurance. Please stop reiterating this whole idea of insurance. The post had zero to do with such, even if it is what we practice.

On another note, these illustrations are real. They are from MTL - Mutual Trust Life - and they can be verified if you are truly all that concerned...I don't think you are, I just think you want a little more understanding. The death benefits increase because of what is called a paid-up additions rider. You can google it, but basically as you contribute and as dividends are placed back into the policy, the policy is purchasing additional insurance- it has too. The insurance policy has to maintain a corridor between the cash value and the death benefit, and can't endow until it is meant to. So this is why you see growth on the death benefit. Its pretty cool actually.

We also have some software that illustrates what happens to the policy as you borrow from it. It basically enhances the growth of the policy as you borrow from it. If you want to see some of how that works feel free to drop me a line.

This is some great stuff, and a lot of people don't see it because they think they know everything about everything- this is clearly demonstrated in previous posts by many people here. I guarantee not one of them has seen one of these policies, nor understands how it is structured. But as you can see, we may have something of value here, and it is not the work of a charleton.




You asked how the death benefit in the illustration from the video can grow so fast. Around 2:30 in the vid when he says that the insurance company will "take part of the dividend and purchase a 1 year term insurance". I think that may be the answer or at least part of it. 1 year of term would be fairly cheap. 10 year term of $1M for someone in their 30's costs around $300 ballpark. I'm betting that the 1 year term of $1M would cost around $150. If you've got $95,000 in cash value then that $150 represents 0.15%. So they could cut 0.15% off the dividend and pay up a $1M term policy for that year. If thats what they're doing then its quite clever.

The video is comparing a cash value policy to buying term and investing the difference.

1. They cite a $840 annual premium for $1M level term. I get quotes of around $700 annual for $1M.
2. The video assumes a 30% tax rate. Marginal tax bracket of 33% kicks in around $200k taxable income. Which is the top 1-2% of the nation.
3. They assume a 2% management fee on your investments that you might make instead of the cash value insurance. Thats high I sure hope people aren't paying that. Index funds are more like .1%-.5% and mutual funds 1.5%.

They are stacking the deck in favor of the cash value insurance.

The rate of return on the cash value insurance is about 4.6% initially. THen they add 30% taxes, 2% management fee and over priced term and it goes up to 9.8%.

Why would someone be paying 30% on a mutual fund anyway? Are they going to do nothing to avoid taxes and shouldn't it be taxed at the 15% long term capital gains rate? Who's going to pay a whopping 2% expense fund on a mutual fund?

Today a 20 year AAA municipal bond rate is around 4.6%. Those are tax free and can be bought with marginal initial fee and no ongoing expenses. Couple years ago muni's were going for 5.5%.

Jim- you are hopeless... too much pride to admit there is something of value here you've never realized. You think you are so well versed in everything this world has to offer that you will remain blind to many of the good things this world has to offer. At least Apex was willing to admit that he hadn't seen it this way before... whether he likes it or not is irrelevant, he is someone I can at least have an intelligent debate with.

Jake, Huh? What? Now I'm "hopeless" with "too much pride" and "blind". I really don't know where that came from or what its in response to. I don't think it qualifies as "intelligent debate" on your part either. Its more like personal attacks against myself. Maybe you'd care to point out what you think I said which is wrong and present facts to counter it. I'm honestly frankly puzzled what you're talking about.


I guess I need to apologize. That may have been a little harsher than it should have been. It gets a little frustrating.... it seems to me like your only desire here is to bash everything that is presented to you. I enjoy a healthy debate, but when a question is answered, your immediate response seems to be to move on and attack another, entirely separate argument. It get's difficult to follow. You just want to pick apart every little part of this, and try to find the part where you can prove that we are scammers and dishonest people. Would love to hear a better option than what we are presenting here. Municipal bonds?

Life insurance salesmen have been dreaming up ways to sucker people into buying cash-value policies for decades. New sales schemes are trotted out at about the same rate that Taco Bell trots out new taco products. The "infinite banking concept" or "be your own bank" or "self-banking" is just the slick sales-pitch flavor of the week. Plaintiffs lawyers will be feasting on these companies in a few years.

Pardon my strong language, but people peddling this type of policy in the manner demonstrated on this Board are scum. I suspect that Nick, Josh and Jake are three guys with high school diplomas, maybe bachelors degrees, who couldn't find jobs after graduation and turned to their father Dan's insurance business in desperation. They were quickly taught at the company that insurance is an "eat what you kill" system that rewards high sales figures. They were taught that term life insurance pays paltry premiums and that the real money is made selling cash-value policies.

The problem Nick, Josh and Jake faced was that everyone and their grandma knows that whole life insurance is a ripoff. Solution - call it something else! Voila. The new scam takes off. Here are some telltale signs that infinite banking is just another hustle:

(1) Creation of a myth. The salesmen have made up a story that "infinite banking" was created by a war hero. Right.

(2) Obfuscation. The salesmen clamor about how simple the system is and how much information is available, yet even intelligent victims feel completely bewildered by sales pitches.

See this thread. Comments by Apex and Jim.

(3) Brainwashing terminology. The salesmen use phrases such as "get the mind out of traditional thinking" and "don't follow the crowd" to play to the potential victim's ego by convincing the victim that the system is only available to smart insiders. Bernard Madoff used the exact same con.

See this thread. (Comment by Jake on Dec. 19 at 6:14 p.m.)

(4) Misleading quotation of unrelated statistics. Here, the hucksters all claim that major banks buy billions of dollars of whole life insurance policies. (Comment #5)

See this thread. (Comment by Jake on Dec. 18 at 11:15 p.m.)

Comparing the BOLI vehicle used by major financial institutions to the cash-value policies being sold to individuals by Nick, Josh and Jake is misinformed at best and intentionally deceptive at worst.

(5) Too persistent. The people advocating the scheme are too aggressive and persistent to be believable as altruists. Here, Nick, Josh and Jake wrote 10,000 words and 40 posts begging people to buy their cash-value insurance product. Their tone became aggressive, condescending, one-sided and increasingly frustrated. An altruist would simply make his or her point and entertain other viewpoints without such an obvious agenda.

See this thread. (All comments including comment by Jake on Dec. 20 at 5:17 p.m.)

(6) Fly-by-night. The salesmen on this board claim to be from Eagle Capital Management. Which fly-by-night eagle business are they? Are they an eagle pack of one? How many eagle-related financial product websites does it take to convince the American public that these eagles prey on wallets rather than fish? (swooping eagle) (soaring eagle) (jambalaya eagle) (flock of eagles) (6th grader's first eagle blog) (hair club for men eagle aka real eagle)


@Nick, Josh and Jake - I suggest that you stick to peddling your wares to old ladies in the alzheimers wings of nursing homes. Ethel and Rosemary have plenty of retirement savings and won't ask so many questions. Your boiler room tactics aren't going to fly on a website full of personal finance dorks.

@FMF - I love your blog and will keep reading, but it is a shame that you chose to give these Eagle Capital Management hustlers the sheen of respectability that appearing on your blog confers. Pardon my back seat driving.

Jake --

I think Jim asks some decent questions. It appears he's dug into the issue enough to find out some details and it would be worth it for you to address them/your assumptions.

If you could address the basis for your projections -- especially around the cost of the policy, the assumed tax rates, and the management fees -- that would probably be helpful for the discussion.

@ Kevin. how did Walt Disney start his empire of theme parks? You guessed it, everyone else turned him down so he used his life insurance policy to finance it.

I guess my only question is how can anything be a rip off when you aren't losing any money? How is it a rip off when you are guaranteed a 4-6% rate of return? And how is it a rip off to have the ability to pass on a legacy to your heirs tax free?

Never once have I, or every will I, "beg" someone to listen to me, and it is hard for me to listen to you call my comments condescending and aggressive while you make comments like:

"people peddling this type of policy in the manner demonstrated on this Board are scum"
"I suspect that Nick, Josh and Jake are three guys with high school diplomas, maybe bachelors degrees, who couldn't find jobs after graduation and turned to their father Dan's insurance business in desperation"

None of us have stooped that low kevin. I can pretty much guarantee that you are older than I am and should show a little more poise and maturity while speaking to someone you don't know. I would have no problems saying everything I've said in this thread directly to someone's face,and I do so on a daily basis, I don't think the same is true for your and some others that have commented here. Hiding behind the mask of a computer and calling people you don't know from adam scum and untrustworthy seems childish. There is no way I could sleep at night if i knew i was involved in anything dishonest.

I respect the opinions that have been shared here, and I'm very glad I could stir the pot a little with this article. And I'll say again, the traditional understanding of whole life is the roadblock that is causing all the tension. I will be more than happy to share with anyone what I personally make on any given policy, it's no secret that by using life insurance for becoming your own bank the agent is taking a very large commission hit compared to the traditional way of selling whole life.

Wow, this post is very tricky.

Let me see if I understand:
1. Pay cash. Pay 40k in front and after 5 years, the investment is worth 20k. -40k + 20k = -20k. I don't know if you want to consider that value that the truck adds to your business or life.
2. Finance. No down payment, and after 5 years, the investment is worth 20k. In those 5 years, the total payment on principal and interest is 48.663k. -48.663k + 20k = -28.663k
3. Be you own bank. Pay 40k in font and after 5 years, the investment is worth 20k. -40k + 20k = -20k Now, lets say that you paid yourself the financing cost, 48.663k. The math now is -40k + 20k + 48.663k (to you) - 48.663k (from you) = -20k
4. Be you own greedy bank (Interest rate over 100%). -40k + 20k + 19248.663k (to you) - 19248.663k (from you) = -20k ; We are not moving forward :( Let me use the post math, -40k + 20k + 19248.663k (to you) = 19238.663 Nice, we are rich now :p

who does want to use me as a bank? I am available!!!!!

I included values in the video, that is why I added the link. It shows the internal rate of return from an actual policy by MTL. The values are copy/pasted. You can see a visual of some of the values there. The internal rate of return: 4.69%, tax free. This is the basis for our banking system, a liquid fund that grows tax free. It also gives you insurance. Not sure how this can be hated? A municipal bond is similar in return and tax advantages, but it gives you no liquidity, no control, no insurance, and no asset protection. Where's the horrible scam seen here?

Again, no facts, no documentation, nothing but pointing fingers at insurance. And I guess you didn't read all the comments. Mr. Confused (Apex) grasped what we were talking about and saw that it is much different than he had thought. If you are so sure of what we are talking about here, please explain to me how we sucker people. Give me some details on exactly what we sell....

Jake --

Ok, so can you answer Jim's questions here in text form so we don't have to pull them out of the video? Seems like a good thing to do to bring clarity to the issue.

The beauty of working with numbers is that there is no paradigm shift required to prove that one system is superior to another. If you show actual numbers (and share the assumptions used in the process), it is straightforward to evaluate whether one system is superior based on your own personal risk preferences.

Dear 3 Amigos,
spivey has a good point. Your attitude that anyone who doesn't agree with the economics of your system is too simple comprehend it is condescending and offensive. I'm sorry but insurance is not that complicated. It does not require someone to expand their thinking. You are not leaders of a thought revolution. This idea has been around for years online and in books. And I have NEVER seen it pitched by someone not related to the insurance industry. If it takes you "50 pages on a blog" to explain the intricacies of your product you should consider getting a sales coach. That is, unless I missed something and your product involves plans to build a rocket. What you've been experiencing throughout this thread are negative reactions to your vagaries and repeated side-stepping, not dimwitedness or pride. The flagrant personal attacks on naysayers is just lame. Because of the expense, this system makes the most sense for people who already want insurance. There's nothing wrong with that. I personally know a gal that was able to lock in a 10% rate years ago and uses this system successfully. I doubt someone locking in 3% now is going to be patting themselves on the back in 5-10 years. It depends on their situation and M+E expense.

I enthusiastically call BS on your claim that you're presenting a general idea for a life hack that is unrelated to your product. We are not stupid. Sales 101- Do not insult your potential prospect. In short I'd suggest the three of you "Sell it up the street."

Further, this talk of the amount of bank owned life insurance policies actually supports why someone would not "invest" in life insurance. Large companies routinely PAY to hedge their risk. As someone pointed out earlier, banks tend to use these policies to limit their pension liability. It is an expense line item--NOT an investment. If more individuals had this mindset they would be less inclined to overinsure. And I wouldn't know less insurance agents with six-figure

P.S. @Kevin I think I love you.

Jake, Apology accepted. Thanks.


"Mr. Confused (Apex) grasped what we were talking about and saw that it is much different than he had thought."

I think my "confusion" may be greatly exaggerated. I stand by what I originally said. I just thought the life insurance performed much worse than it did. On that fact the system is not nearly as bad as I thought. Still not convinced it's good. It might be ok to good depending on a person's circumstances.

However, I do object to how your team has presented themselves and sold the system here. I think for most people this system is likely inappropriate and that is part of why I suspect you pitch it how you do.

You also said this above:

"The point illustrated here was unrelated to insurance in the first place. This was financial advice that had to do with BANKING. Be it in a savings account, 401k, IRA, shoe box, or insurance. Please stop reiterating this whole idea of insurance. The post had zero to do with such, even if it is what we practice."

This just is not true and this is the kind of thing that turns people off to your tactics. To see you claim this is a strong indication to me that you are unwilling to be completely honest about everything you are doing.

The original post didn't use the words life insurance but all the examples and arguments presented in it depend on your life insurance system.

The article nick posted included an example with specific numbers. Those numbers (setting aside that the math is not accurate), were based solely on your system. You don't claim I can get those numbers in a savings account right? Of course you can't claim that because in the article one of the counter examples is paying with cash from savings and you show how poorly that performs compared to your system. So why do you comment here claiming that the original post was not about life insurance and could just as easily apply to any system including a savings account?

When a sales person uses these kinds of means to sell the product it makes me so leery of them that I find it hard to trust what they are saying because so many things have been done that are meant to obfuscate or frame the issue or to cast the proper light on things.

I will be honest, I don't care for sales people. I have met very few who give me the whole truth. I feel exactly that way about everything that has gone on here.

It appears there may be a life insurance product that could be somewhat viable for a system like this (assuming the illustration is accurate). But I can't trust the details from here. I would need to find an unbiased source someday if I wanted to consider it. I am not sure who that would be but I am quite confident it is not a life insurance salesman.

I guess I am missing where we have been unclear... where we didn't provide real numbers... where we didn't show the value of life insurance... No on has yet to show me where life insurance is not as I've demonstrated...

Jake --

Maybe I missed the section where you listed numbers. If so, please forgive me. But I'm looking for the answers to the following questions:

1. Do you numbers include an $840 annual premium for $1M level term?

2. Does the video/your numbers assume a 30% tax rate?

3. Do you assume a 2% management fee on the investments that you might make instead of the cash value insurance?

If you can answer these, I think we'll be on the same page.

Lets look a little closer at the whole life policy from that video. Consider the first 5 years of the policy.

The annual premium is $20,000. The cash value at the end of year 1 is $13,261 guaranteed and $13,475 including non-guaranteed assumptions*. That * is not explained in the video but I assume its the dividends from the mutual insurer which are not guaranteed. I think this is fair to look at the dividends cause mutuals will pay dividends. But what they will pay in the future exactly is unknown so its a projection and NOT guaranteed.

Your return on investment for the first 5 years based on guaranteed values:

1 = -34%
2 = -27%
3 = -17%
4 = -10%
5 = -6%

In other words if you own this policy for say 3 years and pay $20k a year and then cash it out you'd end up losing 17% of your money. You'd have paid in $60k and walk away with $50,002. The projection including the dividends is better but you'd still be negative for the first 4 years.

This is not what I'd call a "good" investment for the first 5 years. After 5 years the insurance starts to pay off better and if you hold it for decades you'll end up with a total 4.6% rate IF you get the non-guaranteed assumed dividends. THe video figures that 4.6% rate based on the dividends and they do not figure the internal rate of return for just the guaranteed figures.

Long comment string - you'd think the conversation was about economics or precious metals :)

Yeah, I'm with Apex and the rest. This "system" isn't for me, and nobody has even talked about the counterparty risk angle to it.

Everything here can be summed up with one famous quote: If you don’t know who the sucker is, it’s you.

I guarantee the life insurance company, their salesmen, and everyone else involved in these transactions are making serious money - and that money has to come from somewhere (hint, it's YOU!!!). Maybe there are some tax advantages, let's be generous and say 10% of the profit comes from the Government. The other 90% comes from you in the form of administration fees, processing fees, riders and other complicated insurance that you pay for and then receive no ultimate benefit.

Insurance isn't rocket science. Term means I pay $60 a month for $1M payout if I die unexpectedly in the next 20 years. If I don't, that $60/month is gone and the insurance company profits.

Cash value policies are a complicated mess - it took me an hour to understand a simple policy, and I'm no financial slouch. Adding this system on top ensures the average consumer doesn't understand what is going on, what the risks are, and will ultimately make poor decisions. Just look at trade-in values when financing a new vehicle - sure you might get a great price for that trade-in, but they just slapped 1% more on the interest rate while you were looking over there.

One thing that I haven't seen mentioned here is what happens when something happens and you can't pay your insurance premium. Guess what your giant policy will be worth? A whole lot less than you were led to believe. If the basic numbers are this complex, do you want to guess what the fine print will be like?

Sorry, FMF, I think you need another post about the math from these folks. Have them send you or some other brave volunteer the actual numbers for your given situation. Either they do it or you post how you regret giving them any sort of forum for their rip-off deal.

P.S. Bravo to Apex, Kevin, Jim and the rest.

FMF, those numbers $840 for term policy, 30% tax and 2% expense fee are in that video linked to. Jake didn't claim those numbers. THe video is actually trying to make a comparison between an example whole life policy and the "buy term and invest the rest" method. They start by saying that the whole life has a return of 4.6%. Then they compare it to a term policy that costs $840 a year and investing the difference. They say that you'll have to get 9.8% return on your investments due to 30% taxes and 2% expense fees and the $840 cost of term in order to equal the 4.6% return of the whole life policy. Its all in the video.

THe cash insurance has a 4.69% internal return.

Then they figure tax equivalent rate after 30% taxes. Now they claim its equqal to 6.7% return. (4.69 / .7 = 6.7)

Then they account for the cost of paying for term at $840 a year. So they figure the whole life is euqal to getting 7.01%

Then they add in the impact of paying a 2% management fee and conclude you'd have to get 9.19% on your investment to equate to the whole life.

Disclaimer: I read this blog daily and have followed this thread closely, although I don't think I've ever posted.

First, after digging into quite a few Google searches (good lord, Jake/Josh/Nick, you guys are prolific promoters), I'll say this: the concept actually doesn't seem like a complete rip-off, but a niche "solution" (option, I'd rather say) for some people. That's fine.

That being said, I am absolutely and completely turned off by the idea because of the way J/J/N have presented themselves and the sales pitch (yes, it is a sales pitch, you're promoting an idea that you make money from). With a bit more respect to Nick, the snarky, exhausted name-calling ("Mr. Confused"? " least he is someone I can have an intelligent debate with" ...Really, Jake?) and continuous run-around - because yes, you guys have given up a few scenarios and numbers, but only with a lot of prodding and the examples aren't exactly the picture of clarity - just make the entire product and its endorsers (the three of you) seem like the stereotypical slimy salesmen. Which, for future reference, doesn't do anyone a whole lot of good.

Some debates/thoughts that I found interesting (and clear, and intelligent) after my date with Google on the subject:

@DineroDiva: You're my hero.

Vanguard has 13 different tax exempt funds that have returned 4.5% to 6.8% over their lives. Their expense ratios are 0.2%. Tax free, liquid, safe and simple.


Your comment about J/J/N being prolific promoters is true. I found that myself but didn't mention it. That is how I knew they were all working together though because they appear in posts and comments together in various places or link to similar things and videos.

It is interesting that they associated me with a big Dave Ramsey supporter. I never go to Dave Ramsey sites but I found some of his stuff about life insurance while searching and found them all there posting against him in the same fashion as they are here.

So you are right that they do show up all over the internet defending their system and doing so with the same tactics that they have used here.

Their approach certainly does not come off as trying to inform but as trying to defend and promote a system that they are pushing very hard.

This is the longest post I think have seen while following this blog... I also have been following the thread for the last several days looking for an example that is simple and easy to understand. I will not invest in something that I don't understand, and this concept (I assume this is the same thing as variable universal life) is not strait forward.

I always figured that I would max out my 401K Roth contributions, pay off all debt, max out Roth contributions, max out out 529 plans before I would even look a life insurance product that is not term. At this point in my life it appears that my estate will be less than $10M, so I am not sure that I NEED life insurance for wealth transfer to my heris. Am I missing something?

BTW, I think the lack of dislosure initially of the related parties (Jake, Josh, Nick), does not help credibility, IMO.

I am willing to run the numbers to see if this is a viable financial solution for me. I looked at some of the other threads at some other sites and came up with some rough numbers for returns and fees. Spreadsheet follows:

The left side is if I put my money into life insurance, the right side is if I put the same amount of money into a bank account.


1. Decided to pay premiums for 7 years and then stop.
2. Assumed fees and commissions totalized over the first 2 years were 50% of my premium, and then no fees after that.
3. Assumed I was getting about 3% back per year in dividends/interest based on my cash value in the account because that seems fairly consistent with rate of change in the cash value accounts I have seen listed by others. I used 1% for the return at the bank because that's about all you get these days, although as you can tell by the spreadsheet it can easily be adjusted by year to whatever I see fit.
4. Didn't include any PUA at this point because quite frankly I don't know how it works
5. Haven't done any calcs on death benefit because I am mainly looking at this as a replacement to a bank account with death benefit as an added bonus
6. Assumed that my cash value increases based on the sum of my previous years cash value minus fees/commision plus interest/dividend
7. When I took out a loan against the policy assumed it didn't effect the cash value used as the basis for calculating the interest/dividend return.
8. The loan value is $40,000 paid back at 5% over 5 years

So, what am I missing? And which of my assumptions aren't viable?

Final note (very important): I am mainly at looking at using this as a bank. Not interested in the fact that, yes, I could get more return with my money investing the same amount in the market. But, the reality is I am not going to have 100% of my money in the market. I will have money in cash that I want liquid and that is what I am comparing it to.

Jim --

I understand the numbers are in the video. Just trying to get someone from the group of advocates (Jake at this point) to confirm it in writing...

I went through the video, grabbed the numbers, and did my own calculations. From a guaranteed standpoint you can get an equivalent return outside the life insurance policy by getting a 3.6% return and paying 30% tax on it. Therefore, if you take taxes out of the equation, the insurance company needs to only average a 2.5% return over 30 years to reach the non-guaranteed values they provide you.

It's also important to keep in mind that they take quite a chunk of your money up front. For instance, it takes 5 years before you are even breaking even. And, it's and 8 year period before they even give you a 1% return on your money. So they (the insurance company) have many years up front to hold your money largely interest free and make money off it long before they start paying out to your account.

Bruce --

Thanks for helping us get to the bottom of the issue. It's very much appreciated and (I'm sure) will serve as a helpful guide to people finding this article via Google, Bing, Yahoo, etc. for years to come.

Bruce, nice looking spreadsheet! One part of the life insurance vehicle that hasn't been mentioned is the fact that when you take a loan from your policy you are taking that loan out against your cash value. In other words if you have $50,000 in cash value the company is willing to give you a loan using the $50,000 as collateral. So one of the corrections I would make to your spreadsheet is the fact that you will continue to earn interest on the full cash value regardless of whether or not you have a loan out.

I hope that makes sense, you are taking a loan from the companies general fund of money and they are collateralizing that loan with your cash value, so your cash value is not touched.

There are some other things that I think need explaining, your assumptions about commissions and fees, paid up additions for example, but I'm working with my partners and FMF to possibly get another post up detailing some of the things that have been questioned.

Thanks again for putting the spreadsheet other question...what assumptions did you make about age when calculating those numbers?

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