Of course you’re delighted to know your aunt and uncle love you so but then you ask them what interest rate they’ll charge.
When you find out that they want to charge 12% you feel a little miffed. After all you can borrow the money for only 8% at your local bank or credit union. Thanks but no thanks! Right?
“Hang in there” auntie and uncle say, “Don’t get all bent out of shape. We only want to charge you 12% because we want to give it all back to you.”
Now you’re puzzled. What has gotten into my favorite aunt and uncle? Should I take them up on this seemingly “too good to be true” offer or just tell them to bug off?
Well this is a dilemma I face daily. Over and over again when I share the Infinite Banking Concept with other people they tell me to keep the 12% and bug off. How sad for them. They end up being big losers.
You see when you borrow money from a participating whole life insurance policy’s cash values, all the interest that you pay back on that loan profits you. Every dime of interest you pay on that loan goes to what is called the cost basis of the policy and that cost basis benefits you by increasing the face value of your policy. As your face value increases so does the cash value of your policy and therefore the amount of money you can borrow against it. This can be repeated time and time again and each time you do, it just keeps growing and growing for you.
Now what if your gracious relatives mentioned that on top of giving the interest money which you pay to them they would also like to pay you a rate of return on all that interest which you pay them? Would you think they were really crazy now or just trying to rip you off? Hopefully you’d be gratefully delighted?
That is because in participating whole life insurance there is nothing crazy and no one is attempt to rip you off. The insurance company simply promises you by way of a unilateral contract that they will pay you a guaranteed rate of return on all the interest that you pay back to them on policy loans. So, as you pay the interest back to the insurance company on your cash value loan(s) you earn interest on all those interest payment. If you haven’t noticed by this time, this is similar to the old adage “having your cake and eating it too.”
Now why this concept isn’t taught to high school students, I’m not really sure, because the longer you let this interest on top of interest work for you the the longer Einstein’s 8th wonder of the world belongs to you. And remember Einstein said, “The 8th wonder of the world is compound interest.” What a simple and powerful way to become wealthy without ever having to work longer or harder than you have to work anyway… just to get by in life.But unlike your wealthy aunt and uncle, participating whole life insurance only happens to those who want it. No lucky draw of genetics here. And no wishing and praying for rich relatives to feel sorry for you. No, you can actually choose to purchase it… what a novelty, but oh how simple. All you do is pay for it.
But once you pay for it and begin to earn that guaranteed rate of return on every penny of what you’ve paid in you can use money which the company guarantees that you can borrow from them on terms very similar to the terms your make believe aunt and uncle suggested above. And you’ll have plenty of cash for that vacation and anything and everything else that you’d like to purchase throughout your life time. Not a bad deal when you consider that if your aunt and uncle put you in their will and left you a couple million bucks you’d lose most of it to the tax man before you’d ever got to enjoy a nickel of it. But when you place your money into a participating whole life insurance policy you can borrow and repay it and never have to face the tax man again in your life time on the growth you will experience in that policy. Better yet, when you graduate your beneficiaries won’t face income taxes on it either. Way to go!
By Tomas McFie
Join us in Orlando this fall at the Rx for Wealth Workshop
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