One of the biggest financial problem we all face comes straight from the book, Becoming Your Own Banker; Parkinson's Law.
"A luxury, once enjoyed, becomes a necessity." In financial parlance, this means expenses tend to rise along with our income.
Taxes, debt service, and lifestyle expenses always tend to rise at the same rate as our income, leaving only what's left over to save and grow.
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One of the biggest financial problem we all face comes straight from the book, Becoming Your Own Banker; Parkinson's Law.
"A luxury, once enjoyed, becomes a necessity." In financial parlance, this means expenses tend to rise along with our income.
Taxes, debt service, and lifestyle expenses always tend to rise at the same rate as our income, leaving only what's left over to save and grow.
And we've found this to be just as true for someone making $1M per year as it is for someone making $30k per year.
In this episode, we talk about this and many other problems The Infinite Banking Concept solves. By having access to capital and being able to finance our own purchases and investments in a strategic manner, we kill many proverbial birds with a single financial stone.
0:00 - Introduction
0:12 - Episode beginning
0:21 - “What problem are you trying to solve?
1:31 - The official problem
4:54 - The problem that we all have
9:36 - Protecting your family against the loss of income
15:19 - Passive income
21:39 - Thinking long range, protecting your family in the future
30:21 - Accelerating the payoff of debt
33:23 - Reducing of eliminating taxes
39:18 - What whole life can’t do
41:32 - Episode wrap-up
Hosts John Montoya & John Perrings are dedicated to spreading the word about Infinite Banking so you can discover for yourself how you and your loved ones can benefit with a virtual streamlined process that will take you from IBC novice to sharing the strategy with friends and family... even the skeptics!
John Montoya is the founder of JLM Wealth Strategies, began his career in financial services in 1998. He is an Authorized Infinite Banking® professional and works nationwide.
John Perrings started StackedLife Financial Strategies after a 20-year career in the startup world of Silicon Valley where he specialized in data center real estate, finance, and construction. John is an Authorized Infinite Banking® professional and works nationwide.
[00:00:00] John Montoya: Hello everyone, this is John Montoya.
[00:00:04] John Perrings: And this is John Perrings.
[00:00:06] John Montoya: We are Infinite Banking Authorized Practitioners and hosts of the Fifth Edition, episode 65. What problem does IBC solve? We get asked quite a bit. Is this. Strategy, Infinite Banking, right? For my situation, and one thing I always think of right away to ask is what problem or problems are you trying to solve?
[00:00:32] Is it, are you trying to protect your family against the loss of your income? Are you trying to create a place for a rainy day fund or even an opportunity fund for investments? Have. Thought of the need to create better control over your cash flow. Are you solving for that problem? Are you looking to create a source of guaranteed passive income come retirement time?
[00:00:56] Is leaving a guaranteed legacy for your family important to [00:01:00] you? Are you looking maybe to accelerate the payoff of debt? Possibly trying to reduce or eliminate. Taxes. And specifically if you're coming to our podcast because of your interest in Infinite Banking, maybe you're here because you're looking to solve for the need for financing in your life.
[00:01:22] John let's kick off this episode. What do you want to hit on first
[00:01:27] John Perrings: when you talked about the problem that, what does IBC solve for us? So when people are asking that. With Infinite Banking, there's an official problem that we're trying to solve, and so as authorized Infinite Banking practitioners, I think it's important and important to touch on this because.
[00:01:49] I think it gets a little bit lost in the shuffle sometimes with a lot of the kind of sensationalized, like YouTube stuff that you see out there. There's a very specific problem we're trying to solve as [00:02:00] authorized IBC practitioners and not to harp on the authorized part, but. It does make a difference.
[00:02:06] We have a thing that we're trying to do. Infinite. Banking is a real thing that we're trying to solve a problem. What's that problem we're trying to solve? Most Americans out there haven't, we all have a need for financing in our lives and. Really everyone else, everyone's sending money away.
[00:02:26] They're financing that through outside parties fulfilling their need for financing. And when they do that, the interest that they pay flows away from them and into someone else's financial system. when you practice The, Infinite, Banking, Concept, we're creating the structure so that you can satisfy your own needs for financing throughout the course of your life.
[00:02:49] And the interest that gets paid for that flows back into your financial system. And when we talk about the problem, that's one of the big [00:03:00] problems that we're trying to solve. When we practice Infinite Banking, we are trying to solve the need for financing because if you look. If you look at the data out there it's something like around 35 cents of every dollar that.
[00:03:18] Spend in your life is going towards servicing debt, right? So if you just look at your mortgage, look at your car payments, look at your credit card bills, whatever it might be 35 cents of every dollar on average in America is going towards simply servicing debt. What if we had a system that redirected the flow of some of that debt service back to where it benefits us?
[00:03:43] That's what we're doing with The, Infinite, Banking, Concept. And by the way, if you're one of those people that says, I don't have any debt, I pay cash for everything. Guess what the rule is? You finance everything you buy. You either pay interest to someone else when you use their money or you give up interest you could have earned when you [00:04:00] pay cash.
[00:04:00] And so that's what we're trying to do. We're trying to help people underst. How that works. How you can create this financial tailwind in your life where if we're res, if we're repositioning money and interest to go back into our financial lives, to fulfill all of our financing needs. It cr it's gonna push you through your financial life in a much more efficient manner.
[00:04:23] And I think it's important to touch on that first and then the rest of this episode. Hey, by the way, , I'll say it again by the way. It does all these other things that John Montoya just mentioned, and it does it by default. You have the option to do all these things that we just mentioned. So we're just gonna go through this list here.
[00:04:43] And I'll kick it back over to John. Montoya. How about protecting your family against the loss of your income? How is that a bad thing?
[00:04:50] John Montoya: It's never a bad thing to. But there is one thing I thought of while you were talking that I wanted to share because you were [00:05:00] Making the listeners aware of the problem that we all have.
[00:05:06] And I thought to myself how long do we have this problem? And the answer is our entire life. I was just talking to someone yesterday a woman who's 49 years old with kids, and she was talking about. Her interest in IBC and I asked her, what sparked her interest in getting started?
[00:05:26] And she was talking about the need for financing and, she was then going into retirement and how she's gonna work for, so many years. And I said you're 49, how long do you plan to work for? And she said maybe early sixties. And I said, okay do you think you're gonna have a need for financing just until you retire in your early sixties?
[00:05:52] Or are you gonna have a need for financing? for the rest of your life. And she thought about it and she's for the [00:06:00] rest of my life. And I thought, okay, then let's broaden the scope here instead of just looking at solving for your need for financing up until you retire. How long do you actually plan to live?
[00:06:13] And she laughed because, it, it's a funny question, but we don't think in these terms of. , I plan to be around for the next 3, 4, 5 decades. And what are we doing to solve for our need for capital, for the entirety of our life? So number one, be aware of the problem, and that's great that you are now aware of it.
[00:06:41] but how are you gonna solve for it and for how long are you gonna solve for it? Because this isn't like you're trying to just save until your Golden Ears years and then, problem solved. You need to solve for financing all the way through. That's right. So that was the point that I wanted to make [00:07:00] there.
[00:07:00] John Perrings: And before we go on, you just made me think of something else. And so it is common that people are like I'm trying to figure out how this can help in my life, how do I do IBC? What does it do for me? And we always go back to this. You've, if you read the book and I don't want to deflect and say that I'm not gonna help people understand or anything like that, but, The book is the source material, and it goes a long way to understanding and opening up your mind.
[00:07:33] I remember one of the things after I read that book the first time, I started thinking of all kinds of things that I could do to make my financial system work more efficiently. And I think if more people, really just read the book, and by the way, there's an audio version, you can listen to the book if you prefer.
[00:07:52] It really. It really does help. And it's a, it's 90 pages. It really won't take you too long to read it, but [00:08:00] it's a, it'll, rather than asking someone how to do IBC and what it'll do for you, it's really, I've heard other advisors say this and it's a super important point.
[00:08:12] It's becoming your own banker, O-W-N, your own banker. So you have to be able to really think about some of these things on your own. And by the way As advisors, we're here to help you. But when it comes to implementing IBC other, once you go on the other side of the coin of strategically capitalizing with whole life insurance, and you come down to what do you actually buy with your capital?
[00:08:38] We can help with that. But at the end of the day, the definition of an opportunity, I don't, I'm not gonna recite the real definition cause I don't know what off the top of my head. But a real opportunity is something that is specific to your. Local knowledge and your ability to take advantage of that opportunity.
[00:08:59] [00:09:00] So a lot of the best opportunities is are not going to come through somebody telling you like, Hey, I've got this thing that'll get you that rate of return or whatever it the best opportunities are. The ones that. Only you can really take advantage of because you happen to be at the right place at the right time.
[00:09:16] And by the way, you got a bunch of liquid capital sitting there ready to deploy. Because as Nelson said, if you have cash, opportunities have a way of finding you.
[00:09:27] John Montoya: That's right. That's right. So let's now jump into, The other bullet points that I started off the show with, and you brought up the first one, protecting your family against the loss of your income.
[00:09:39] These whole life policies automatically are gonna do that. And one thought that I hadn't thought of before until recently, and it happened as I was paying the annual premium on one of my policies. . And I thought to myself, you know what? This is the most adult. That I can possibly do.
[00:09:59] I'm married. That's awesome. [00:10:00] Got three kids and I'm gonna pay this premium. And I feel really good about it cuz I am protecting my family and I am adding to this slush fund, for whatever purpose this is right now, this is the most adult thing I can do by paying this premium and the death benefit.
[00:10:22] Especially for IBC. I know a lot of people come into it and they say death benefit's not really that important for me, but I tell you what, it's the most adult thing that we can do. When you're married, you got a significant other you have kids. Yeah, and even going a little bit further too, it's also the most adult thing you can do for yourself.
[00:10:44] And that leads into why is that? With IBC and these whole life policies, you're automatically creating a rainy day fund for yourself, right? Yes. That is an adult thing to do. [00:11:00] You are creating an opportunity fund where, you just talked about it. When opportunities come around, you know it's gonna find you because you have cash, right?
[00:11:10] That's right. This is seriously an adult thing to do. Pay your premium every single year, and the longer you do, The better off you're gonna be.
[00:11:22] John Perrings: The, you saying that reminded me, I have a few, a very few friends, one of my best friends is a client of mine and he called me up the other day and he's Hey man, I just wanted to say thank you.
[00:11:36] He's lived a, he's lived a pretty colorful life. He's done a lot of cool and some crazy stuff. And, he is just an awesome dude. And He now feels he's, he said, this is the one thing that I feel like I'm doing that's like totally responsible, and it's like I just have a good feeling.
[00:11:56] I, I'm so happy knowing that I have this in place and [00:12:00] I just, I didn't really realize it at the time when I first bought it, I just bought it cuz the way he talked about it seemed like a good idea. But he's I love having this now. And made me feel great. Obviously.
[00:12:12] Even more important is the sense of peace that he has knowing, that he's building this asset. And I think a theme that we were already, a pattern we're detecting here already is that This asset is so crazy good. It handles on autopilot all these things we're talking about right now. So I'll just say it up front like automatically.
[00:12:37] It does this and it does this and it does this and we're, so we're just gonna go through the list and but it's . You hear people talk about, why they like their 401ks or whatever, and they're like, yeah I just, it's I put my savings on autopilot and it's yeah, that's, one feature of a 401k.
[00:12:54] You put your savings on autopilot into something that you can never touch it for the next 20 or [00:13:00] 30 years. And so it's like, how's that a good thing? So we're doing the same, we're accomplishing the same thing. Doing it in a way that gives you a hundred percent control over what's happening.
[00:13:11] Where the terms of everything are made up front. You know what's happening with these with a whole life policy, with this contract, right? Whereas you have no idea what's gonna happen with your 401k. And even if you did, you can't even get to it for a while until you turn, some arbitrary age.
[00:13:30] Point five in it. And so anyway, as we continue on the list, Yeah,
[00:13:38] John Montoya: You're hitting on better control of your cash flow. And, the point that you're making there with the 401ks and IRAs is that you, you might be saving money in these accounts and on the surface of thing that's a good thing.
[00:13:51] But what you may not realize is the unintended consequences when life happens. Yes, either [00:14:00] good or bad. That money is restricted and you really have to jump through hoops to get access to it. So you don't really have control over that asset, and you don't have control over your cash flow like you would with an IBC policy because, when you take a policy loan, I get this question asked quite a bit.
[00:14:22] What is the monthly payment I gotta make back to the policy? And it's really just it's a new thought paradigm where I'm having to explain to people you get to decide. And I remind people, remember, this is becoming your own banker. You are the banker, right? So whether you want to pay back that policy loan, Two years, or, 10 years.
[00:14:48] It doesn't matter. And it's determined by you. You're gonna take a look at your cash flow and what's the best route, what's the best path to take [00:15:00] to Yeah. Recapitalize your policy so you can take your next loan. Yeah. It's the,
[00:15:05] John Perrings: it gives you the. To do exactly what is right for you at that time.
[00:15:11] And rather than having all these terms that are someone else's terms, you have terms that are your terms. I'll jump into the next one here. If having a guaranteed source of passive income, here's another great another great piece that I, I don't think people really realize.
[00:15:33] These policies have guarantees. And it creates a source of income that it could, this income could be today if we need something or if we, if we need more income. Or it could be, and, or it could be. When you get to that kind of retirement age, we don't really talk about, how we like to retire around here, but a lot of people are going to be retiring.
[00:15:59] but [00:16:00] how else can you have any kind of guarantees? Most people, again, putting their money into these 401ks, they have no idea what the return's gonna be on the way up. When they're saving, they have no idea what the return's gonna be. When they're taking money out, they have no idea what the taxes are gonna be.
[00:16:16] And one of the biggest problems is people taking money out in down markets and it totally will kill their retirement account and they can absolutely run outta money. And and we've talked about this in the past. Having some whole life insurance to go along with those investment investments, having both creates a better outcome than either one can do on their own.
[00:16:39] And so having the guaranteed passive income allows you to roll with those down markets, giving you the guaranteed income while and giving your market investments a chance to catch up and come back up as the market goes up. Just a couple of examples of how guaranteed. Passive income could work.
[00:16:57] And by the way, again, it's all tax [00:17:00] free if you do it right. And maybe you could do it and pay taxes on it as well. There, you can certainly withdraw above, the total premium you've paid and you might pay some tax, not the end of the world, but you can also do it in a way where it's completely tax free the entire
[00:17:15] John Montoya: way.
[00:17:16] Yeah. Having more options come. Retirement or passive income time. I is always. A goal that you should have, and you hit on a couple different strategies. Sometimes it's called volatility buffer. There's the covered asset strategy. Then there's the rather simplified strategy. If you're just utilizing a whole life policy to create passive income, you can withdraw down to your basis what you've contributed into the policy.
[00:17:46] And then once you reach that basis, You can then take policy loans for income, and then there's also the option to annuitize a portion, of your cash value into [00:18:00] a guaranteed income stream for as long as you live. So you get all these options by having a whole life policy. If all you do is just contribute to a 401K and ira, not saying that's a bad thing by itself, but if that's all you're.
[00:18:15] you're limiting your options come retirement, and that's not even to take into consideration all the volatility You're exposing yourself, not just until you get to retirement, but living through the rest of your days exposed to all that volatility. So to have an asset that is completely uncorrelated from the market, that gives you all these additional.
[00:18:37] why would you not add this to your overall portfolio of what you're doing? Why would you not make this a part of what you're doing to protect your income against, you prematurely dying to have a rainy day fund, to have an opportunity fund, all the things that we're talking about.
[00:18:56] Hopefully this is becoming clearer for you. [00:19:00] Why the, this strategy, why people gravitate towards it once they learn more about it. Because once, once you go down this rabbit hole with IBC you really come to understand why, you know this is a no-brainer. And we hear people say that quite often, right?
[00:19:17] But you gotta go down that rabbit hole and you gotta, you have to be responsible for. Doing the research and the study and then reaching out to authorized advisors like the both of us so we can answer your questions so we can show you how this works, how you'll have more options. Yeah, and
[00:19:37] John Perrings: There's a, because of the actuarial nature of insurance and the flip side of insurance, which is annuities, it works on the same principles.
[00:19:46] What you get from that is a higher distribution rate. The only thing people think about in when they're doing retirement is how mu what's my what? How can I get the biggest rate of return to create the biggest account? But once you get there, [00:20:00] it's not about your big account, it's about your big income.
[00:20:03] And that's what we need. And insurance products do a far superior job of cr, of higher distribution rates. On the same capital base. And so that's just a fact. And it happens again because of the actuarial nature of the products. And so if you and we're not saying rates of return are nothing, we're just saying having both will make things come out.
[00:20:30] A lot. You'll have more income and you'll have way more certainty and that, so that's I think hopefully wrapping up the passive income.
[00:20:39] John Montoya: Yeah. Yeah, I think so. We have a note here that with IBC, you're automatically gonna leave a guaranteed legacy. That's just the function of these whole life policies.
[00:20:49] It's a guaranteed death benefit. And that's specifically unique to whole life because any other type of policy [00:21:00] that you. , you're essentially just renting the death benefit. You never actually own any equity in the death benefit. So just by accepting a whole life policy, you are guaranteeing a death benefit to your beneficiaries.
[00:21:20] It's part of the contract and it's unique only to whole life that you will. Your death benefit, any other type of contract, you are simply just renting it. And
[00:21:32] John Perrings: Going back to the kinda. , the book Becoming Your Own Banker. In that book he talks about thinking long range and, the time period that he looks at, he compares how most people look at their, financial timeframes.
[00:21:48] And they're looking in 30 or maybe 40 year. Periods of like when they're working and the minimum that he talks about on the book is looking at 70 years, because now we're [00:22:00] thinking about the next generation and it's a, I can't even, I think you and I probably both started from scratch because we didn't have really a generational wealth kind of structure in our families, right?
[00:22:16] Imagine the incredible freedom that the next generation and the generation after that could experience if they didn't have to make decisions about what they're doing in life just based on money. You know what I mean? They could. And do and go after the things that they're passionate about and they want to have as a mission and not worry about the financial repercussions, which would allow them to do the best job that they possibly could do.
[00:22:42] Cuz it's all on, it's all about the mission at that point. It's not about how that money, how the money's coming in. And it's a challenge. New IBC practitioners have a challenge with that because, we, our commissions are much lower than just a standard, [00:23:00] insurance agent that's selling straight whole life.
[00:23:02] And so we have to, sacrifice for a period of time until, we can build our businesses. And and that's a real thing. , it's hard to do unless you've, have some kind of thing that's already been saved up either by yourself or the generation before you. And that's true of any profession.
[00:23:24] John Montoya: You made that very real. I, my, my family, my dad was the butcher for 35 years. My mom was a cashier at the same grocery store, so a blue collar. E every phase of my life going into adulthood. My family's always drove the beater cars and thankfully we had a roof over our head and enough to pay the bills.
[00:23:50] But when my dad passed away, unfortunately he hadn't updated his death benefit. And all he had was a 25,000. Death [00:24:00] benefit to go to my mom. And, it just it wasn't enough. It was something, but it wasn't enough. So the offshoot of practicing IBC Yeah. Is that you were gonna have a policy with that guaranteed death benefit that you own and control, but also too, because of the function of how it's designed, it's gonna help keep up with inflation because, , you have this paid up edition writer, and as a practice, you're overfunding the policy to capitalize.
[00:24:33] And what's happening not only is the cash value increasing, but you're multiplying the death benefit at the same time. You're increasing the death benefit over your lifetime. , and that's automatically. Gonna put your family in a better position. I think about if my dad had started a whole life policy early on and contributed his premium, he wouldn't have had a static $25,000 death benefit paid out [00:25:00] to the family, to my mom.
[00:25:03] It would've grown over time and it would've acted as a, rainy day fun and everything else that we talk about. , but man, I think about, it can't go back, but you think about what if, what if, they had learned a little bit more about whole life policies and IBC didn't exist as a strategy that was trademarked back then.
[00:25:25] But even just doing a whole life policy, my goodness there, there would've been I guess a, an easier path and a lighter burden. For my family and I'm sure you can relate to that
[00:25:39] John Perrings: too. Yeah. And one of the objections that we'll hear and we're actually back on 0.1 here, protecting your family against the loss of your income.
[00:25:47] But it's a, it's it all, like I said, it all is happening at the same time. And one objection I hear to that strangely is that people don't want to pass anything onto the next generation. [00:26:00] Cuz they don't wanna, they don't want their kids to be like, trust fund babies and, be irresponsible and that kind of stuff. And that always surprised me cuz that's not an issue of just having money. That's an issue of how you're raising your kids. You know what I mean? . So we're not like in the Kid Raising podcast business here. But at the same time it's The, these are two totally separate problems.
[00:26:25] And when I'm always a little bit stunned by that comment, and I've heard it many times. , and that's why I'm bringing it up. And it's just okay, who is teaching your kids about the principles of money? If it's not you and and you have no skin in the game to pass anything along to them.
[00:26:46] I was having a good conversation with one of my best friends yesterday who has a whole life policy, and we were talking about how people in their fifties tend to be, pretty good clients for us. And one of [00:27:00] the reasons is because, , they've already done all the investing and so they don't have that FOMO that like a 20 or 30 year old has where they're like, I gotta be investing and getting that rate of return.
[00:27:09] They're a little more open to other assets. And if you actually run a future value calculator on them continuing to contribute to their 401k, versus stopping like right now and doing a future value calculator, you find out that those numbers aren't too different. Cause it's all the money that they already have in there.
[00:27:25] That's. The majority of the growth work on the account once you're in your fifties. And my, but my friend looked at it a different way. He said He said, you are you gonna keep putting your money in here and how much are you gonna get off of that money in your 401K from now until when you retire?
[00:27:44] What, maybe a couple hundred thousand dollars or something like that? That's probably it. Whereas if you put this money into a whole life policy starting now, you're. You're going to create millions of dollars for your kids. And it's at this point in your life [00:28:00] you're, most people are thinking about their kids anyway.
[00:28:03] Maybe they're obviously thinking about their retirement as well, they're also probably thinking about their retirement in a way that they don't want to be a burden to their children too, if they haven't saved enough by now. So those are problems that we work on, but it's like, you want this money to go in and create a little bit of money for you, or you wanna put this money somewhere where it can create you.
[00:28:23] Life-changing money and generational money for your children. And I was like, ah, that's a pretty good way of thinking about that there, buddy. I hadn't thought of it that way. Yeah,
[00:28:31] John Montoya: I think you gr bring up a great point. And what I think about there is the efficiency of every additional dollar for those people that are maxing out their 401ks and ira, especially in their fifties, cuz you get a little bit more room to do but compare it to you. separating or segregating part of that contribution into a whole life policy instead. And how [00:29:00] efficient are those extra dollars going into your 401k ira compared to putting the, putting those same dollars after tax or pre-tax, depending on the situation into a whole life policy.
[00:29:12] And you'll be really surprised. It's night
[00:29:15] John Perrings: and day. It's crazy. Yeah. You're. It. It is. It absolutely is. And and then, going back to our guaranteed passive income, if, and then if you start running calculations on how much income that will provide you in retirement, it blows it out of the water.
[00:29:30] It's crazy how much it's always better to start early, but the people in their fifties are usually more open to it because they just, again, they don't have that fomo and they're, and retirement's a little more real for them. Once they get in their fifties, they see it coming a little bit more so they can start to take it a little more seriously.
[00:29:51] So I love talking to guys in their fifties. It's the perfect time to really take a lot of this stuff seriously. On this side [00:30:00] of things. So we talked about the IBC problem of needing financing and all of these problems we're talking about today. We're just handling 'em at the same time, right? With no additional money.
[00:30:09] And so we're doing all this stuff and I'll save it for the end. Go ahead John. Hit the next one. So the
[00:30:17] John Montoya: next one is accelerating the payoff of debt. Yeah. If you have access to capital and you're unfortunately in a debt situation where you're paying high interest rate to traditional banks.
[00:30:33] This automatically becomes a it, it automatically is a secondary place to source your financing. So you can look at your whole life policy and say, okay should I continue paying 10 12, 18? , maybe even as much as 25% to traditional banks because, I've accumulated this debt for whatever reason, or should I [00:31:00] take a policy loan at five to 6% and pay off that debt?
[00:31:04] And even other strategies utilizing whole life to help you accelerate the payoff of that debt. So this is just, again it's another benefit. To being well capitalized to having capital in a strategic location where you can get access to it because this really isn't an option. If you're doing the conventional financial planning, which is funder 401ks and IRAs, and then lean on the banks to, bail you out when you're in a liquidity crunch.
[00:31:37] That's right.
[00:31:38] John Perrings: And, one of the things with paying off debt is a lot of people will prioritize it, and it's good, to get out of debt. But a lot of people I think, go a little too far with it. They take all their disposable income they go to, to try to pay down this debt, and what happens is they don't have anything to fall back on, if any, if [00:32:00] anything unexpected happens and they end up right back in debt.
[00:32:03] The when, if you can, instead of prioritizing those other people's financial systems, yes, you're gonna pay a little more interest, of course, because you're gonna take a little bit longer to do it. . But if you actually use some of the strategies that are available using whole life insurance, you will still pay your debt off faster.
[00:32:22] And when you're done, you'll have a bunch of money . You know what I mean? That's right. You're gonna have a bunch of money sitting in your cash value after you're done paying off that debt rather than paying it off and starting at zero. , it's a massive difference in how that works.
[00:32:39] And I know John, Montoya and I both have kind of systems that we work with to help the process of using life insurance to pay off debt in a correct manner. So if any, cause what I've found is a lot of people, it's so daunting to them. They just, they see all this debt and they just can't imagine getting over it.
[00:32:57] And then when you introduce a process and they're like, oh, [00:33:00] how do I even do this? So I know we both have used different systems in the past to. help them have a process for doing this so they don't have to think about it too much, and it just happens. Yeah.
[00:33:10] John Montoya: And then of course, once you're outta debt, then we start to get to the good
[00:33:14] John Perrings: stuff.
[00:33:15] Yeah. That's right. That's right. Yeah.
[00:33:18] John Montoya: And so the last item that we had on our list is reducing or eliminating taxes and pretty awesome. My whole life policies have been around before the i r s tax code was created in 1913 the whole life product itself predates the i r s and yeah.
[00:33:42] The solution and solutions that IBC and specifically whole life can help solve for they, they've been around seemingly forever, certainly much longer than our lifetime going back before, our grandparents' lifetime. [00:34:00] This is a solution and the government.
[00:34:04] Recognizes this, Congress recognizes this and they've made provisions within the tax code to, to really. Give us an option that, unfortunately it, for 99% of us, it's hiding in plain sight because we don't recognize it as a place to park wealth and to help reduce our tax load or even to eliminate taxes really on the premium dollars that we're putting in there.
[00:34:34] But it's right there in the tax code and it's not a loophole. Congress knows about it. You have to see the bigger picture and realize what you can do with the whole life policy. And if you're thinking just solely whole life insurance is for the death benefit. I agree with Nelson when he said that the worst thing that the life insurance [00:35:00] industry did was call in this product whole life insurance because it really confuses people into thinking that it's all about the death benefit.
[00:35:09] No, it's. The death benefit is attached to the contract to ensure that you're made whole. But there are these additional benefits and taxes reducing and even eliminating taxes. Is one of the benefits of these whole life
[00:35:29] John Perrings: policies? Yeah, there's the, the tax treatment of the policy itself, which, by the way, you mentioned it, it's not a, it's not a loophole.
[00:35:39] Just like you, don't pay taxes. If you crash your car and you get a, check from your auto insurance company, it's an indemnification. And so that's why there's no tax, there's nothing, There's no loopholes. It's not sketchy. It's insurance. It's very simple. But then the strategies that are available to you when you have a [00:36:00] guaranteed.
[00:36:01] Cash flow at the end of your life are pretty amazing, especially from a tax perspective. There, there are a lot of strategies to help, reduce the tax paid on other assets. We've talked about charitable remainder trust on the podcast in the past. You can offset taxes and other things you can.
[00:36:22] Reduce the tax on assets that are sold. There's, there are, some strategies there. The other piece of it is when we are capitalizing, and we do it for the purpose of going out and acquiring other income producing assets. So this is more for the W2 employees out there. If you can start doing that and you acquire other assets that create a 10 99 or any K one, whatever business income you have, it opens up a whole new world for you in terms of like tax deductions and reducing your taxes because you're now receiving a different type of income other than w2.
[00:36:59] Because when you're a [00:37:00] W2, you really don't have any kind of, your mortgage deduction is about the only thing you get as a W2 employee. And so you pay the highest taxes out there. And so if you can start developing strategies in your life, The only way you can do it is to get capitalized. If you can do it, you open up a whole new door from, for your taxes from now until when you die.
[00:37:23] So amazing tax benefits when you have whole life insurance in your life as part of what you're doing. I wanted to, I, so I said I would save it for later. You mentioned here, our next bullet point is like the, whole life is very much like the Swiss Army knife of the financial world.
[00:37:43] And you could probably find it out there if you Google it, like a c an asset comparison or something. But, John and I have maybe shown this on a webinar before, but there you can find charts out there that have the checklists that compare all the different types of assets. [00:38:00] You can compare stocks, 401k, ira, Roth bonds, municipal bonds, CDs, like the list goes on.
[00:38:09] Compare all of them. And then Graph or create a chart of all the features of all of those, like the tax status, the growth rate, the liquidity, all that stuff. Whole life insurance is the only one that checks every single box on the comparison charts. And the only one that sometimes people don't check is the good rate of return, which is, by the way, also a myth, I think, because if you.
[00:38:39] Analyze the tax adjusted rate of return of whole life insurance. It's completely respectable. And so it's the only one that checks all the boxes. Just think of your perfect investment, whatever that is. And again, life insurance is not an investment, but if we were to just say, think of your perfect investment, what are all the features of that guarantee you whole life [00:39:00] insurance is the only one that could check every single box that you come up with.
[00:39:04] Yeah, absolutely.
[00:39:05] John Montoya: And. To that end, we also want to acknowledge that whole life as great as it is, and we've just given you a pretty good list of all the problems, financial problems that we come up against in our life and how whole life will help you. Let's also realize that whole life cannot do everything right.
[00:39:32] It's not it's not perfect. It can't as an example it's not going to compete with actual investments because it's not an investment. A as you hit on also too, look, you still have a need for a checking. Just because we're solving for the replacement of a traditional bank doesn't mean that we're creating a new type of checking account with your policy.
[00:39:59] You still need [00:40:00] to work with your tradit traditional bank and have a checking account because. , you need to pay your bills. Yeah. And you need to do that on a monthly basis. So IBC is not for paying for your groceries. We get some people that are interested in IBC and they're like, how can I do this so I can start paying my bills?
[00:40:20] No, that's not what IBC is for. IBC is an incredible strategy, but you gotta look at the bigger picture. It's not for short-term thinking, like paying your bills and using it, right? As a primary checking account cuz there is no checkbook access from your policy. When you take a policy loan that money's going to either be mailed out to you or more efficiently.
[00:40:46] It's gonna be dropped into your checking account. So it doesn't. That, that financial function in your life. But we're not trying to do that. We're trying to think much bigger than that. [00:41:00] Yeah,
[00:41:00] John Perrings: we're becoming our own banker, not becoming our own bank, right? That has caused maybe a little bit of confusion out there, the whole Banking thing.
[00:41:09] But we're taking over the Banking function. We're not truly becoming a bank where you can do all of the, day-to-day stuff that you need an actual bank for. It's really about, again, controlling the financing that you're going to need throughout your life. It's not about, paying for your groceries.
[00:41:29] all that stuff. Okay, this was a good episode. I think we can wrap it up here. If you have any questions and you want to find out a little bit more about how IBC could work in your life specifically, you can head over to the fifth edition.com and right there you can schedule an appointment with one of us.
[00:41:49] No obligation free 30 minutes, and we can talk about. If you're one of those people that likes to learn a lot and do research before you talk to anybody, [00:42:00] there's a 50% discount to our online course right there at the top of thePage@thefifthedition.com. Cool. All right, John. Thanks. Yeah,
[00:42:08] John Montoya: that was fun.
[00:42:08] Let's start solving more problems for people. Absolutely. Take care everyone.