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May 23, 2024 | read

115. The Ins and Outs of Banking on Yourself (aka The Infinite Banking Concept) with Sarry Ibrahim

Ben Isley

Today we’re joined by Sarry Ibrahim, Financial Consultant, Health and Life Agent who helps high net worth individuals, real estate investors, business owners, and retirees grow and protect their wealth predictably and safely by Banking on Yourself.

In this episode, we talk about the ins and outs of Banking on Yourself aka the Infinite Banking Concept including investment and tax benefits, asset protection, the requirements and who should consider this strategy.

Banking on Yourself

We’re talking about whole life insurance. Whole life insurance has two main functions or purposes. One is the death benefit, the life insurance part. The other is the cash value part. This part has additional benefits that can’t be found in a traditional checking, savings, brokerage, or money market account. A whole life policy, if structured the right way, can provide guaranteed, safe, predictable growth on a tax favored basis.

Overfund a whole life insurance policy to build a large cash balance in the policy. You can then loan yourself this cash balance. You’re intentionally overfunding the policy to the maximum allowed by the IRS based on your age and income. There are no underwriting guidelines when loaning this money to yourself, and there are no restrictions on what you can do with proceeds. This is instant liquidity to this cash balance via a loan, you just need to speak with the insurance provider.

The first step to this process is that the policy must be from a mutual insurance company. The insurance company gives dividends back to policy owners – not shareholders. The policy must also be non-direct recognition. You’re not withdrawing your previous contributions – you’re borrowing money from the insurance company against your cash value. This allows your original contributions to continue growing and compounding uninterrupted. The growth of the policy will likely even outpace the interest on the loan. In an emergency situation, you can withdrawal money with a loan from the cash balance, and you’re not sacrificing the opportunity cost of future gains on money that is currently invested.

The policy must be properly structured. If not properly structured, it can easily take 10 years or longer to break even. A portion of the contribution every month should go to the cash value instead of the entire amount going to the death benefit side. This can allow you to break even in 3 years or less.

At the end of the day, Sarry isn’t advocating to replace any investment strategy with the whole life policy to bank on yourself. However, it’s wise to place this whole life policy in between you and the banking system. Regardless of what happens in banking, the stock market, or the economy as a whole, the whole life policy with a cash balance will provide instant liquidity always. This asset isn’t correlated to any other external factors outside of the control of the individual investor.

“With the whole life policy in the middle, you have an asset that’s not connected or correlated to anything going on in the stock market or external factors that banks or Wall Street control that you can’t control. It’s important for real estate investors to have at least on asset like that, not to replace anything, but place it in the middle of what you’re doing.”

Tax and Legal

The growth of the whole life policy is tax-deferred. Generally, accessing the cash is using after-tax dollars. In most states, the cash value of a whole life policy is protected from creditors and predators. This isn’t treated as some form of investment or savings account – the value of the cash balance is still considered a life insurance policy. This makes for powerful asset protection.

Who Should Bank on Themself?

This is great for somebody who needs to get into the habit of saving. You need to have to discipline to put money away every month and save. At a minimum, $300-$500 a month would start working by building a couple thousand dollars a year. By year three, your cash value would start to break even. This is an opportunity to save blindly:

“You don’t necessarily have to choose between saving money diligently or investing and spending. You can do both, where you’re funding the policy and then you can borrow right away, use that money, pay yourself back, and recycle that money.”

If you do borrow, you need to pay it back in a reasonable time frame.

“It’s not an over the counter product that one would just buy. It’s a mindset shirt – you want to think more like a bank or large corporation, where you want to retain your profits and continue earning compounding interest while you’re using it.”

If using the whole life policy for real estate purposes, this is a more advanced strategy. You need to have capital dedicated to funding this cash balance either very aggressively or at a high amount consistently. Therefore, this strategy makes more sense for the intermediate to advanced investor that has already established their savings, investments, and income streams. This is a way to take another powerful step in becoming your own bank.

To learn more about or to contact Sarry visit: www.linkedin.com/in/sarry-ibrahim…tcp-bank-on-you/