In our last post on Why Whole Life Insurance Is a Bad Investment we talked about diversification. In today’s are article we will discuss:
Reason #2: Whole life returns are not guaranteed.
People for some reason continue to compare stock market returns and returns in Whole Life Insurance when they are not even in the same category. Whole Life Insurance should be compared to conservative savings like Bank Savings, Certificates of Deposit (CDs), Money Market Accounts, US Government Bonds, etc. When doing this type of comparison you will note that Whole Life Insurance Contracts do have a guaranteed rate of return. When you look at an illustration the left hand side clears states guaranteed. Dividends are not guaranteed and are a result of the profits of the company minus expenses. In a mutual whole life company, what is guaranteed is that profits must be distributed to policy holders. Once a dividend is credited it can never be taken away is also guaranteed.
Again, Whole Life Insurance is not an investment but a place to store money for future use that does provide a guaranteed rate of return plus a death benefit as well as a host of other attributes. Your money grows tax deferred, you are paying premiums with after tax dollars, the money grows and if utilized correctly can be taken tax free. Secondly utilizing certain riders, a whole life policy can provide other living benefits like Disability Protection, long term care, Cash Value Protected from Creditors, Ability to borrow against your cash value for purchases and other investments.
A properly designed whole life insurance contract that follows the guidelines of the Infinite Banking Concept as outlined in the book “Becoming Your Own Banker” is considered one of the best ways to build Long Term wealth over ones life and for multiple generations. Many financial entertainers that have no fiduciary write articles on websites and blogs continue to bash this concept without ever properly understanding how money works or understanding how much tax and one pays over their lifetime.
The Infinite Banking Concept works without even using a whole life insurance contact. One could become their own banker by using HELOCs, Bank CDs for collateral, or margin loans from a brokerage account. The key when thinking about using a whole life insurance contract for Infinite Banking purposes is the guarantees, the history of safety and security of your wealth and the ease of access to your money when needed.
Learn more about the Infinite Banking Concept purchase the book Becoming Your Own Banker.
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