Become your own bank

[Drew Cameron]

Hi fellow BPers. I stumbled across a book that was mentioned in one of the forums here called "The Wealthy Code" and read it cover to cover really liking the ideas, content and the way it was written. The author wrote another book called "The Bankers Code" about using whole life insurance as a way to create a personal bank. After reading this I have read a few other books on the topic and I am excited to get my plan setup. The premise is that we pay 34.5% of every dollar we make to interest and taxes. By using a life insurance account as a vehicle we can gain access to funds that are fluid, the interest compounds and pays big dividends when it is time to retire. There are fees associated with setting up the account, but once you get through the "loading phase" where you are feeding the account money annually, you can withdraw from the account for things you would normally finance like a car or house and make the same monthly payments to yourself as you would with conventional financing. By doing it this way there are no loan fees (other than the initial to setup the account) then you recoup the interest by paying yourself back the same interest rates that are being offered at the time. Meanwhile your funds are growing around 10% annually in an account that is fluid and will pay dividends when you retire, and also pay out a death benefit in the millions. Has anyone out there done this with success?

[Thomas Rutkowski]

I use the strategy myself. I've got many clients also using it with great success. There are a lot of people here on BP that are using it as well.  It works very well. 

What you described sounds a little convoluted and I'd certainly question the ability of any life insurance product to generate 10%. It really just comes down to a very simple premise: if you can put your cash into an account where it can earn 6-7%, and you can use that money as collateral for a loan, you are essentially putting your money to work in two places at one time. The bigger the spread on interest rate earned versus interest rate borrowed, the greater the growth rate.

The asset protection and death benefit aspects of life insurance are just the icing on the cake. 

Here's a link to a short primer on the subject: https://www.biggerpockets.com/blogs/7595/47651-are...