All Forum Posts by: Mark Ferguson

Seriously, we've answered all your questions as simply as possible and pointed out your errors. We've posted models with real numbers. My own personal real numbers! Other investors using the strategy themselves have chimed in.

This chart below shows an investor using his own money to invest in a hypothetical investment paying 10%. It could be a note, it could be a private loan. If you don't like 10%, create your own spreadsheet and plug in your own number. It doesn't matter.

At the end of the year the investor made $7,200 after paying tax. Any disputes?

The chart below shows someone putting $100,000 of premium into a policy designed for maximum cash value and minimum death benefit. This is the first of 5 premiums of $100,000. I am assuming the investor has $500,000 of total investment funds. A 5-pay like this is the optimal way to get your savings into cash value life insurance. It gets your money working fast and minimizes the amount of death benefit you must purchase.

There are some key points you should know:

1. You have immediate access to the cash value. There is no waiting to build up cash value. This is the 1st premium of a 5 pay. Anybody who says it takes forever to build up cash value doesn't have a policy optimized for cash accumulation.

2. There are no fanciful growth assumptions. These are numbers you can get in the market TODAY. Besides that, the 85% assumption is the STARTING cash value, that is, BEFORE ANY DIVIDENDS OR INTEREST HAS BEEN CREDITED. If you don't like the rates I've used, plug in whatever you want. This model still works!

3. The single biggest misunderstanding of the "haters" on this thread is that people think you are borrowing from yourself. YOU ARE NOT BORROWING FROM YOURSELF! The insurance companies sell billions of dollars to suckers who think it is better to buy term and invest the difference. They have to do something with all this money. One of the things they do is lend it to policyholders for policy loans.

4. This is just a one year snapshot of a 5 year funding. Each year the cash value will go up and so does the amount the investor can borrow. This may not look like a lot of money in year one, but I assure you, when this is carried out a few years into the future, the side fund becomes huge.

5. Have I even mentioned the death benefit? NO. This make sense without even considering the death benefit. That is not to say the death benefit is not important, but if this makes sense to you as it is, then you are going to be absolutely thrilled when you find out how much insurance death benefit this will purchase. That is the icing on the cake for this model.

As you can see, the investor using the "Magic Checking Account" earned over $2200 more than the investor who just used his own cash. THIS IS 31.5% GREATER THAN THE INVESTOR WHO ONLY USED HIS OWN CASH. Next year it will be even more. And more the year after that.

I can't make it any simpler than this.

I have never disputed those claims, I have simply added some points that you guys fail to include.

1. Is it not true that only 15 to 20 percent of people ever get paid out on whole life?

2. Is it not true that the in the example you give the $100,000 investment is not passed to the the heirs? It is used to pay for the life insurance. If you have $500k in cash value when you die and a 1 mil death benefit the heirs get 1 mil, not 1 mil plus $500k cash value. You have said you can increase the death benefit, but that increases all the costs significantly right?

3. Whole life is extremely expensive when you are older right? In the example I posted a 60 year old could get term life for a few thousand a year and the same coverage with whole life would be about 5 to 10 times more expensive per year.

4. You said investing in whole life is the same as investing in a house when it is clearly not. As I wrote before if you invest $200k in a house and a term life policy of 1.5 million and you die you have the house plus the 1.5 million death benefit. If you invest $200k into whole life and have 1.5 million death benefit and you die you have just the death benefit.

My whole point is to show there are other things to consider with whole life. It is not magic. The insurance company makes their money because the cash value transfers to them at death. How else could the policy holder afford to pay the $25,000 a year for the insurance when they get older?

That brings up another question. Does the cash value start decreasing when someone gets older as the cost of insurance increases? If so what happens if someone lives to be an extremely old age and the cash value becomes completely depleted from their account and they still have to pay $30,000 a year in premiums to keep their policy active? This is a real question. I do not know this and would love to know. I wonder if this is why only 15 to 20 percent of whole life policies pay out

1 Vote

Originally posted by @David Lewis:

Originally posted by @Mark Ferguson:

Thank you for agreeing with me! in the first scenario you have 1.7 million when you die and in the second scenario you have 1.5 million when you die having spent the same amount of cash. 200k into the house with a term policy in the first scenario and 200k in the wholelife policy in the second scenario. Your heirs get 200k less if you spend the cash on the whole life policy instead of spending it on the term policy plus the house. That was my entire point this whole time. spending 200k on whole life or on a house is not the same for your heirs.

I don't have trouble with addition, I simply added a loan in there on the house and whole life policy. Pretty simple.

Why are you assuming you put $200,000 into a whole life policy/UL policy and not get $1.7 million db? You do realize you can vary the DB and tighten the costs using term blending and other methods, right?

Because that is what you guys have said. Yes you can increase the death benefit but then you are paying more in premiums and have less cash value correct? Now you are trying to compare a 1.5 million term life to a 1.7 million whole life policy. I am trying to compare two similar products.

0 Votes

Originally posted by @David Lewis:

Originally posted by @Mark Ferguson:

Originally posted by @David Lewis:

Originally posted by @Mark Ferguson:

Originally posted by @David Lewis:

Originally posted by @Mark Ferguson:

Originally posted by @Thomas Rutkowski:

This is so bizarre.

Why are you setting up the example with uneven asset levels ($1.7 million for the house + term, $1.5 million for the life insurance only) and then inventing a $50,000 loss on the life insurance side?

If you're doing an apples-to-apples comparison, you actually have $1.55 million at your death on the cash value life insurance side.

Both sides are starting with the same amount.

@Mark Ferguson, forgive me if this sounds a little rude, but are you serious? This is going on and on, and you're making this way too complicated. At every step you invent problems and apply this weird sort of gorilla math because...I dunno...you have an axe to grind?

You buy a $200,000 home with cash. You have a $200,000 asset.

PLUS, a term policy which you stated was $1.5 million. Combined, your total is $1.7 million for both assets. In other words, assume you died immediately upon purchasing both. Your heirs would get a home worth $200,000 and a term policy worth $1.5 million. Total cash in the bank/assets on hand would be $1.7 million.

Let me put it yet another way: If you tried to claim $1.5 million with the IRS under this scenario, how far would you get?

You don't have to be a life insurance salesman to figure that out.

Now, assume you didn't buy the home and JUST bought the $1.5 million whole life policy. How much do you have? I'll tell you because you seem to be having trouble with addition: $1.5 million.

In the first scenario you are saying you have $1.5 million but you really have $1.7 million.

Now, in the second scenario you have $1.5 million.

Everything after that was math applied to 2 uneven scenarios. So, naturally, you get two different answers.

When you adjust the whole life scenario to equal the term plus a home, everything is equal aside from the fact that the probability of term insurance payouts is <1%.

So, you have a 1% chance of getting the $1.5 million with your home and term policy. Not the brightest move in the world, but definitely better than 0%.

As long as you hold onto the whole life policy, your probability of payout is 100%.

Now, do you want to persist with this nonsense or do you want to have an honest discussion about whole life insurance?

I don't have trouble with addition, I simply added a loan in there on the house and whole life policy. Pretty simple.

It is funny you bring up the 1 % chance if the term life paying out. From everything I have read it is 2 to 3 percent payout rate and guess what? You are now comparing apples to oranges because you are comparing a what if scenario if the whole life policy holder keeps paying there is a 100 % payout, but you are using supposedly real world numbers on the term life. What is the actual payout on whole life? From what I have seen 15 to 20 %!

So thank you for bringing that up, because only one in five people who sink all their cash into the whole life policy will keep it to the end and keep making payments. That means all that cash they sink into it is gone and there is no death benefit at all. Now it is pretty clear why whole life is being pushed so hard on people.

0 Votes

Originally posted by @Adam K.:

Originally posted by @David Lewis:

Explain actuarial science as if you were a 5 year old. Right. I'll get right on that. :)

Yep, that's exactly what I asked, except, not at all. Nice strawman to start it off. I understand the concept you're pitching here quite well, but I've yet to see it illustrated with actual numbers. And I've yet to see it shown to anyone here why it's a good option.

Let me get this straight: you can't be bothered to read through the very detailed posts already posted, so you want one of us to keep posting the same thing over and over so that someone else can just complain, in essence, tl;dr.

Actually, I did read through all the posts, quite carefully, but I knew that your response would be "just read through the thread" or reference some old post. But go ahead, point me to somewhere in this thread that you think I missed that would adequately answer the questions I had with actual numbers to back it up that aren't misleading and aren't missing key information. I'll be waiting.

Let me preface what about to say with this: forget about whole life Adam. It's too complicated for you. I'm serious. Do not buy whole life insurance. This would be a very bad move for you.

Is that how you deal with customers who ask too many questions? Condescendingly question their intelligence? Did you seriously just try and neg me? Like, oh, Mr. Lewis, I am worthy of your wonderful product, I am smart enough! I am good enough! Pick me, pick me! That's pathetic.

When someone resorts so quickly to strawmanning, gaslighting and ad-hominem attacks, it's safe to assume that they have nothing of value to add with their actual arguments and statements. I just find it hilarious that your response is that I'm too dumb to understand and that @Mark Ferguson has an axe to grind. The problem isn't with the product, you guys, it's with us!

Anytime someone is trying to sell something to you and they start attacking you when you ask too many questions or probe too hard, that's a pretty good reason to be suspicious of what they're selling.

I wish I could say that after reading through the thread yesterday that I expected more than an unprofessional response from you, but I didn't. Thanks for being so predictable.

It is sad isn'T it? I ask very basic simple questions and use basic math to show a few points and i am told i am wrong, i have an axe to grind and you are treated like crap. They cant answer those questions which leaves two scenarios. They either dont know the math beyond what they are taught or they are intentionally trying to decieve. I am not sure which one is worse. I have spent hours trying to compute the math and see how this actually works, when i could be doing much more productive things and i am told i must have an axe to grind if i disagree at all.

2 Votes

Originally posted by @Thomas Rutkowski:

Originally posted by @Mark Ferguson:

Originally posted by @Thomas Rutkowski:

Originally posted by @Mark Ferguson:

Mark,

Let's look at two examples.

First, If you had $500,000 sitting in a bank and you took it all out and spent it, you would have zero when you die. Its gone.

Second, If you had $500,000 cash value in policy and $1M death benefit, and you took a $500,000 loan and spent it, its gone. Your beneficiary would get a $500K Death Benefit because you took the cash value and spent it. Same $1M death benefit, only you spent half of it.

Your right I would have $0 in the firs example.

In the second example the $500k that was "my money" that I borrowed against does not become $0 it becomes negative $500k because it eats into my death benefit.

What if I had a 1 million term policy in affect with the $500k I spent in the first example? The $500k does not eat into my term life death benefit, it is simply gone.

Mark, you're wrong. You just spent your beneficiary's death benefit. How can they get $1M if you just spent half of it? Two things are going on in a permanent life insurance policy. Part of your premium covers the risk if you die in the next year. The remainder of the premium is invested for you and is essentially the seed that will become the death benefit after years of additions and compounding. This money is yours. You can withdraw it and walk away, you can borrow against it and go on vacations, or you can simply leave it to your beneficiary. If you leave it, it is OBVIOUSLY part of the death benefit. So if you spend it, its not there for them.

Now, that said, my example illustrates a policy designed for max cash value and minimum death benefit. If you truly want to have CV and a $1M death benefit, its still possible, but now the cost of insurance will be much higher in the policy. In other words, it will be consuming much more of your cash value/premium to pay for the death benefit.

In this case, you would have $1M death benefit over the cash value, or a $1.5M death benefit. You could still spend the loan on vacations and leave your beneficiary with $1M. We can design the policy however you want it. That's why we have so many options.

The money is not mine if it decreases the death benefit, it is the cost of insurance as you said. I can use that money, but it is like a loan until I die. Once I die, the insurance company takes it.

In your first example you said it was the same as spending $500,000 in the bank, but it is not. Because I could buy a one million term policy and spend that $500,000 in the bank and my term policy is still one million. My heirs still get one million. But I take that $500,000 that I had in the bank and put it in the life policy and then I spend that $500,000 it is not just gone, my death benefit goes to $500,000 from one million. I spend the money I put in the life policy and not only is the money gone, but my life insurance policy decreases by that amount.

That's fine in theory Mark. But insurance companies sell term because they know you will probably outlive it. It either not going to be there when you need it or it will be too expensive to purchase at an old age.

I've explained this repeatedly. You are basically saving up your own death benefit in a whole life policy. If you live to a normal lifetime, you have paid your own death benefit. If you take from that savings, YOU reduced the death benefit not the insurance company.

Actually this response is much better than the others i have seen. You keep telling people they are borrowing from themselves and it is their money, but that money is paying for the insurance Policy. Once they die it is gone. It is not the same as buying a house with the money.

So how much does it cost to have a term life policy at an old age? This is what i found from kiplinger.

"The disadvantage is the out-of-pocket outlays. A healthy 50-year-old man would pay $13,940 per year for a $500,000 whole life policy from Northwestern Mutual. A 60-year-old buyer would pay $23,305 per year. (If he bought a 20-year term policy at age 60, he'd pay $2,839 per year until the coverage expired at age 80.)"

Yes the policy expires before you might die with term, but you save $400,000 over 20 years! Thats almost as much as the death benefit.

I know how insurance works and the whole life cash value is used to pay for the death benefit. That $500,000 saved up or whatever it is is used for insurance costs because whole life is so expensive.

People need to consider if it is worth spending 20k a year on life insurance when they are 60. Will they even need insurance then? Kids Will be grown up. If you have invested in real estate wisely you may not need any insurance for your spouse. If you do need insurance at that age. Get a term policy and save $400k

0 Votes

Originally posted by @Thomas Rutkowski:

Originally posted by @Mark Ferguson:

Mark,

Let's look at two examples.

First, If you had $500,000 sitting in a bank and you took it all out and spent it, you would have zero when you die. Its gone.

Your right I would have $0 in the firs example.

In the second example the $500k that was "my money" that I borrowed against does not become $0 it becomes negative $500k because it eats into my death benefit.

What if I had a 1 million term policy in affect with the $500k I spent in the first example? The $500k does not eat into my term life death benefit, it is simply gone.

The money is not mine if it decreases the death benefit, it is the cost of insurance as you said. I can use that money, but it is like a loan until I die. Once I die, the insurance company takes it.

0 Votes

Originally posted by @David Lewis:

Originally posted by @Mark Ferguson:

Originally posted by @David Lewis:

Originally posted by @Mark Ferguson:

Originally posted by @Thomas Rutkowski:

There is a big difference.

Assume I pay $200,000 in cash to buy a house and buy a term life policy of $1.5 m death benefit or I pay $200,000 into a policy with a $1.5 m death benefit.

1. I borrow $150,000 against the house and I borrow $150,000 against the policy.

2. Assume I blow the cash on vacations

3. On the house side when I die my heirs get the house worth $200,000 minus the $150,000 loan for a $50,000 equity gain, maybe $40,000 after selling costs plus they get the 1.5 million death benefit for a 1.54 million payout.

4. On the policy side when I die my heirs get the death benefit minus the $150,000 I borrowed from my "own money" and they don't get the other $50,000 I paid in either. So they get 1.35 million dollars.

I would say the $200,000 asset I supposedly have is no longer my asset when I die.

Both sides are starting with the same amount. The only extra cost in the house example would be whatever the term life insurance policy costs, but much of the money I spent on the whole life policy would go the insurance policy as well like $8k in the first year according to what you guys have said. I figured those costs were a wash.

I am not starting with 1.7 million in the house example. I am using my $200,000 cash to buy a house instead of invest it in a whole life policy. It's very simple. Multiple times the insurance guys on this thread have said the whole life policy is no different than buying a house with the money instead. But it's not. In both cases I have a 1.5 million dollar death benefit and I am investing $200,000. One example I am buying a house with cash with the $200,000 and in the other example I am putting $200,000 into the policy.

The advantages of the whole life are that the insurance goes until I die and does not end after 20 years like term does. I also get paid some interest on my cash value, but that cash value goes to the insurance company when I die. Not my heirs.

How would I end up with 1.55 million at my death on the cash value side? You guys have said multiple time the cash value does not pass to the heirs and the loan is deducted from the death benefit.

0 Votes

Originally posted by @Thomas Rutkowski:

Originally posted by @Mark Ferguson:

Originally posted by @Thomas Rutkowski:

Originally posted by @Gregory H.:

My main takeaway is that if the same few people are posting dozens of longwinded comments in defense of something that they claim everyone misunderstands but a few enlightened ones, then maybe they should keep this supposed Holy Grail of the Investment World to themselves ... the rest of us here will spend our time on something that doesn't induce migraines ... like analyzing real estate deals.

My first post started off pretty simple but everyone tried to make it complicated. Its as simple as this:

If you can put your money into an asset earning 7% (tax-free), and you can use that asset as collateral for a loan at 5%, then anything you do with that loan will be adding value on top of your 7% return on the first asset.

That's it. The only question someone should ask is: how do I design a policy that gives me high early cash value so I can take advantage of these economics. It doesn't even matter if the rates are 7% and 5% like I used. Try 5% and 5%. It still works. Try 4%. It still works.

It shouldn't matter if the underlying product is life insurance. If you read, and more importantly, UNDERSTAND, the significance of the first sentence, this is a no brainer.

Some people just hear the word "life insurance" and they stick their heads in the sand and start chanting Dave Ramsey verses so they don't have to hear the truth.

Thank you for answering my question earlier about the loans being deducted from the cash value when you die. That helps a lot.

When I see my death benefit is $1,000,000, but if I have $500,000 of loans outstanding that I supposedly borrowed from myself and the death benefit decreases by the amount of those loans. That tells me all the money I am paying into the policy is not mine. It is not an asset. It is money I am paying the insurance company and they are loaning it back to me. After all, the insurance company gets that money after I die, not my heirs.

Mark,

Let's look at two examples.

First, If you had $500,000 sitting in a bank and you took it all out and spent it, you would have zero when you die. Its gone.

No, I just lost 500k in that deal.

Your right I would have $0 in the firs example.

In the second example the $500k that was "my money" that I borrowed against does not become $0 it becomes negative $500k because it eats into my death benefit.

What if I had a 1 million term policy in affect with the $500k I spent in the first example? The $500k does not eat into my term life death benefit, it is simply gone.

0 Votes

Originally posted by @David Lewis:

Originally posted by @Mark Ferguson:

Originally posted by @Thomas Rutkowski:

That tells me all the money I am paying into the policy is not mine. It is not an asset. It is money I am paying the insurance company and they are loaning it back to me.

It is an asset because you are the policy owner.

Here, put on your thinking cap and answer this question: how is this different from any real estate investment? Is real estate an asset even though you have to either sell the property (cash in your policy), take income (take dividend payments), or borrow against it (take policy loans)?

There is a big difference.

Assume I pay $200,000 in cash to buy a house and buy a term life policy of $1.5 m death benefit or I pay $200,000 into a policy with a $1.5 m death benefit.

1. I borrow $150,000 against the house and I borrow $150,000 against the policy.

2. Assume I blow the cash on vacations

I would say the $200,000 asset I supposedly have is no longer my asset when I die.

0 Votes

Originally posted by @Thomas Rutkowski:

Originally posted by @Gregory H.:

My first post started off pretty simple but everyone tried to make it complicated. Its as simple as this:

It shouldn't matter if the underlying product is life insurance. If you read, and more importantly, UNDERSTAND, the significance of the first sentence, this is a no brainer.

Some people just hear the word "life insurance" and they stick their heads in the sand and start chanting Dave Ramsey verses so they don't have to hear the truth.

Thank you for answering my question earlier about the loans being deducted from the cash value when you die. That helps a lot.

1 Vote

All Forum Posts by: Mark Ferguson

Mark Ferguson has started 247 posts and replied 2799 times.

Post: Infinite Banking Concept, Cash Flow Banking, or Bank on Yourself

Post: Infinite Banking Concept, Cash Flow Banking, or Bank on Yourself

Post: Infinite Banking Concept, Cash Flow Banking, or Bank on Yourself

Post: Infinite Banking Concept, Cash Flow Banking, or Bank on Yourself

Post: Infinite Banking Concept, Cash Flow Banking, or Bank on Yourself

Post: Infinite Banking Concept, Cash Flow Banking, or Bank on Yourself

Post: Infinite Banking Concept, Cash Flow Banking, or Bank on Yourself

Post: Infinite Banking Concept, Cash Flow Banking, or Bank on Yourself

Post: Infinite Banking Concept, Cash Flow Banking, or Bank on Yourself

Post: Infinite Banking Concept, Cash Flow Banking, or Bank on Yourself