I just finished reading What Would the Rockefellers Do? by Garrett Gunderson. This book talked about how the Rockefellers banked and how they preserved their wealth going through generations. Gunderson speaks on the overfunded whole life policy concept, or what we’ve called the infinite banking concept. It’s the concept of putting money, instead of into a traditional bank, into a whole life insurance policy. These are best utilized through a mutual insurance company, as opposed to a stock company, because the policy owners share in the profits of the company, in the form of dividends. One can put money into the policy and then take a loan out against the policy. The cool thing is the original money in the policy continues to grow with uninterrupted compound interest, as the loan you’re taking out is against the policy (used as collateral) NOT from the policy!
This is a total game changer as it provides another asset to borrow from and is super liquid. If you’re like how I was and thought it was wise to pay cash for a car, and it may still be for some, you might start thinking differently. When I paid the 11k for my last car the money was gone like that! Poof! The future interest that that money could have created has now vanished, never to be seen again. If I would have financed it I’d be paying the principal back to the lender with interest, but a pro in this case would have been that I wouldn’t have needed the cash at the start.
With one of these banking policies one does need to save up the money but once it goes into the policy the future opportunity cost is no longer lost. It keeps growing with uninterrupted compounding interest. If one were to die the outstanding loan amount would just be deducted from their death benefit. See it as an advance of your death benefit.
I actually just started my first Mass Mutual high early cash value whole life policy through the help of Chris Naugle and his Money Multiplier group. It came at a good time because we have been thinking about refinancing our house but wanted to update some things in the house first, including a new kitchen and new paint, to be able to (hopefully) pull a bit more cash out during a refi. I deposited 15k into the policy, which I’m scheduled to do for the next nine years, and immediately borrowed 13.5k against my policy. If I had just paid the 13.5k for the start of the kitchen and paint the future earnings of those dollar soldiers would have immediately evaporated but now that earning potential has been locked into the policy and will grow with a guaranteed 4% (by law), and more typically around 6% with dividend.
One thing I have loved about this experience so far is just how easy it was to request the loan. It was literally a button push and in about 48 hours I received the loan right into my bank account. No dealing with banks and/or underwriting documents. No fees or closing costs. It was easy.
Another aspect I like from this book is that Gunderson really comes from an abundance mindset, not a scarcity mindset. He talks about not restricting yourself so much, and putting the things you love and enjoy into your “spending plan”. Don’t feel bad about spending and living for today, but at the same time have a respect for your future and legacy that you’d like to leave.
One aspect of the book that I hadn’t really thought of is trusts. He talks on this mechanism that helped the Rockefellers control the wealth that was originally created by John D. Rockefeller. From the explanation it sounds like one could setup a governing body, or board, that is in charge of allowing disbursements from the trust. For example you probably wouldn’t want your grandkids taking out money to go do drugs and harmful activities, so that might not be allowed. Alternatively if they wanted money for a trade school education or were seeking capital for a business venture, maybe with approved business plan, that might be allowed by the trust.
I definitely enjoyed the book. It’s a quick read but I definitely appreciate what he’s getting at now that I have some hands on experience with dealing with these overfunded whole life policies. I honestly think I should start another one soon.
Here’s our discussion with Chris Naugle where we get a brief look into the infinite banking concept:
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