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As people learn about the concept of becoming their own banker, they often disregard the very words of R. Nelson Nash who was the founder of this unique concept. In the fourth edition of his book Becoming Your Own Banker: The Infinite Banking Concept, on page 44, Mr. Nash explicitly states,
Time and time again we see policies designed which maximize the insurance (death benefit) in order to increase the cash values, allowing more premium to be paid. Yet, adding more premiums to a policy in this manner, thwarts the benefits of the policy growth by adding to the cost of capital when using a policy for IBC purposes.
There’s no question that a policy with a higher premium—especially when designed with a term rider to increase the death benefit—can accelerate the accumulation of cash value. But accessing that extra cash value comes at a cost. The cost of capital associated with borrowing from such a policy can quickly outweigh the benefits of its growth potential. As a result, maximizing the death benefit solely to grow cash value for borrowing purposes becomes counterproductive.
Interest—whether paid on a policy loan or any other kind of borrowing—adds to your cost of capital. If the dollars used for additional premium contributions could instead be accessed without incurring these added costs, the IBC (Infinite Banking Concept) system would operate more efficiently. That’s a fact worth considering.
Unfortunately, we’re seeing more and more policies being sold or promoted as compliant with Nelson Nash’s recommendations. But in reality, these policies often increase the cost of capital for individuals hoping to use the IBC system as Nash intended.
One must ask: Why is this happening? The reasons vary, but ignorance is at the top of the list. Many simply don’t understand the principles Nash laid out for how these policies should be designed. The second most obvious reason? Greed. Higher premiums typically result in higher commissions.
Regardless of the reason, the key is this: always do the math. When done accurately, math cuts through ambiguity and provides objective clarity. And with objective clarity, you can build sustainable wealth.
Those who try to move too fast often accomplish little more than a short-lived flash in the pan. Steady, deliberate progress will take you further. Keep in mind that everything you do financially is compared to what others are doing. If you can reduce—or better yet, recover—the cost of capital in your life, while others continue to lose it, you come out ahead.
Don’t let anyone play a numbers game with you. A dollar today is not what it was five years ago, and it’s certainly not what it was 30 or 40 years ago. That means the cost of saving a dollar today must be recovered—and the more often you can recover it, the more valuable that dollar becomes.
IBC is the definitive method for accomplishing this. But you must start with the end in mind. Don’t let yourself be rushed into purchasing policies that increase your cost of capital instead of helping you recover it.
Mr. Nash himself wrote the foreword to our book Prescription for Wealth. In that foreword, he stated:
We at McFie Insurance are here to serve you and help you keep more of the money you make. We have helped thousands of people who want to live a better and more productive life and keep more of what they make. Give us a call if you would like us to help you. 702-660-7000. Get the Most for the Least.
Tomas P. McFie DC PhD
Tom McFie is the founder of McFie Insurance and co-host of the WealthTalks podcast which helps people keep more of the money they make, so they can have financial peace of mind. He has reviewed 1000s of whole life insurance policies and has practiced the Infinite Banking Concept for nearly 20 years, making him one of the foremost experts on achieving financial peace of mind. His latest book, A Biblical Guide to Personal Finance, can be purchased here.
This free binder has the information to build your own Infinite Banking system.
