Infinite Banking/banking On Yourself

Hey All,

So I came across the concept of "infinite banking" or "Banking on yourself" and am tryig to find out if its legit or a smart way to approach personal finance.

In short, it is the process of using a vehicle like life insurance to create your own bank to which you lend to yourself with and pay yourself back. There is a lot more to it than that but a simple Google search will bring up all you need to know. Tons of sites and books written on this topic.

I would appreciate input from anyone who has experience with this or 100% knows if it works or not.

Just trying to contribute to the wealth section!



  • I heard a recommendation from Tony Robbins to setup something like this but he called it a personal pension life insurance. The idea was the same, you buy whole life insurance which has a cash value. The cash value ends up being more than what you pay into insurance and then you can borrow that money tax free (including the gains).
  • I had a very convincing salesman attempt to sell me whole life insurance and did some research. It's a terrible investment.

    Most people recommend you buy term insurance and invest outside of that, then when you have enough money you don't need life insurance at all.

    Some resources:
  • Why not just start a bank?

    Something counter to all the big ones. Start very small, maybe just one branch or even internet based. Take deposits and make mortgage and small businesses loans.

    Give customers added value, by making every account a command account such as they use in Australia and parts of Europe (Virgin Finance used to offer something like this too). With these command accounts, every client gets a credit line. The credit line scales to pledge-able assets (property, stocks, life insurance (whole or term), government guarantees for student loans, ...) and income.

    The bank could scale rates relative to the quality of the collateral.

    Nothing unusual yet, but now it gets more interesting for the consumer.

    On any given day for any outstanding borrowing against their credit line, the bank charges the lowest applicable rate.

    Example: A consumer has a:

    $500,000 credit line at n% secured by a house and

    + $ 25,000 consumer credit at n+1% secured by their income cash flow

    If on a given day (regardless of whether they paid for something with a credit card) they only have a total of $400,000 outstanding balance, they only pay the n%.

    If they had a $510,000 balance they'd pay n% on $500k + n=1% on the remaining $10k

    Also, any cash balance in an account gets scooped up on a daily basis to offset any outstanding balance. Over the long run this could save a VERY significant amount of money on a mortgage or loan. Any positive balance they have gets paid some interest rate.

    I like this because all consumer's money and assets work for them as much as possible and it does so automatically without them needing to move things around.

    This makes a lot of their financial life seamless. One wouldn't need to put a time on loans and mortgages. No one would ever need a second mortgage, they could just draw from their credit line as needed. Same thing for reverse mortgages. A home owner could just draw from their credit line as needed without all the other trouble.

    If someone made improvements to a property they can ask to have the property value reassessed.

    We could also give some thought to how to figure in rising or falling real estate values.

    I believe this combination of transparency and ease, if executed properly, should draw very loyal customers.

    Get them to house all their financial assets with the institution.

    Add direct deposits and automatic bill payment.

    If one has all their financial information one could automatically generate tax returns for them.

    Almost as simple as viewing every client as having a balance sheet.

    Give consumers the best break possible and I bet one could keep them for life.

    Make all loans cost +

    Forget about securitization

    Elizabeth Warren would love this idea. A utility banking model that would generate in-sized rather than out-sized profits. Honest and transparent banking that doesn't play 3-card Monte with the consumer.

    This idea completely incorporates the infinite banking model and would make it available to everyone. It also has the advantage of making monetization of assets simple and easy for anyone.

    A better bank. A better system. Someone ought to do this.
  • Starting a bank is pretty ambitious. Along the same idea though, you can participate in loaning your money to individuals through peer-to-peer lending companies like Prosper:
  • I have been using Permanent life Insurance as a savings vehicle for about 3 years now. I spent about 2 years studying the concept of Infinite Banking before I dove in. 


    All I can say about Whole Life Insurance is that, if you asked people to describe their perfect investment, you would come up with every feature of a Whole Life Policy. Try it.


    I was an Investment Adviser who adamantly sold against Insurance products for about 7 years. I was a "buy term, invest the difference" guy. I am now a huge advocate for Whole Life Insurance.


    Finally, when it comes to investment products, I tend to take the contrarian approach. When someone tells me something is a bad idea, I will look into it more. Just look at the previous posts. In regards to starting your own bank, you can do that with your Whole Life Policy. Seriously.


    If you take the time to study and understand the topic, you will come to the same conclusion I have come to.


    Watch the videos on this site:


    Read this book:

    (Buy the book, not the Kindle Version. The book is easier to read because it has charts)


    The book costs $10. No reason not to read it and try to understand it.

  • I *think* i understand the basic premise; heck I even agree with it.  Capital always has value regardless of its source or its "movement".


    An average person easily understands and RESPECTS the idea that if they used $35,000 of a 3rd party's money to buy a car, they are expected to pay back the $35,000 plus some interest.  The interest is the time value or cost of the capital.


    The same average person, however, probably would not assign the same value/cost to their own $35,000 if they bought the car with funds from their savings account.


    The value of $35,000 is the same whether it is borrowed capital or accumulated capital.  So, even if you pay with your own capital, you need to repay the $35,000 plus the interest (to yourself).


    Basically, you own the note on yourself.


    That much I get.  The question is how to accumulate the source of capital (without missed opportunity costs) and how to keep the money working for you when accumulated.  A simple bank account is fine, but your capital is working for the bank, not you.  The Infinite Banking theory suggests life insurance products.  Unfortunately, due to notoriously poor sales practices, red flags of resistance start to wave.


    Anyone have this figured out one way or another?

  • I was a financial planner for 12 years and the best product I could get behind was whole life insurance. It's guaranteed to pay out (whether you die or take a withdrawal), the dividends are paid annually so your policy can't go down, those dividends have been paid out since the late 1800s, and it's one of the safest investments out there. 


    It is NOT a quick way to get rich. It is a very, very long term investment plan. You won't see the huge benefits until 10, 15, 20 years into it. 


    The biggest challenges I had selling it was the cost, the insurability of the client, and it is not an 'exciting' investment. 


    The best, most lucrative policy I sold was a joint and last to die policy that cost $50,000 for 10 years and was guaranteed to pay out $1,000,000 immediately and would grow exponentially from there. In year 20 the value was estimated to be between $2.2mil to $3mil. 


    It works great for charity as well. If the charity owns and is the beneficiary of the policy the client can get a charitable tax receipt for the annual premium paid. The charity gets a big pay out at the end and the client gets immediate tax savings with the charitable receipts.  

  • StevoStevo Upgrade in Progress

    If you can rustle up £50million you can start a bank (in the UK at least). I used to work for a company that started banks. Its a lot easier than you might think!


    I find this idea of signing up for an insurance policy that you are able to withdraw money from fascinating. As far as I'm aware these don't exist in Australia.

    To me, you sign up for life insurance not because you'll die one day, but because you might die unexpectedly and leave your family in the lurch.

    How can an insurance business justify allowing you to make a withdrawal? Interesting stuff!

  • How can an insurance business justify allowing you to make a withdrawal? 


    Actually, I don't think they do.  I think they let you borrow against your cash value.  If you have $50K of cash value, the Insurance company loans you $50K of their money and holds your 50K as collateral.  This makes the loan safe so their interest rate to you is low.  But simultaneously, they pay interest to you for holding your money.  The two interest payments cancel each other, so the loan is net "interest free" or a fraction of a point in the companies favor.


    Why all the trouble?  It is how the contracts are established to receive the tax favorable treatments.


    Again, I think.  Anyone know?

  • StevoStevo Upgrade in Progress

    I need to read more into this! I read about some investors doing similar with people they don't even know - taking out life insurance policies on everyday people, and hoping they die before the break-even point where the premiums > the payout.

  • If you have the time, everyone should learn about these concepts. 


    These guys have great videos:



    Plus, read the book in my previous post. just buy it, its 10 dollars

  • Hello, 1st post and thought this is an interesting read. Ive dug around a bit and it sounds intriguing.

    Here are the basics as I understand them. Assuming 100K with minimal death benefit and not touching it for 5-10 years

    You move funds to an insurance contract (SDIC) where you get locked in (for example 8%). If the market goes to 10% you get 8, if it goes down you are locked at highest value... If it grew to 150K and the market has 2 months of down then you are still at 150K

    It transfers in tax free, grows tax free and when you need 20K you take a 1-2% loan out but you cash value is still growing and the loan is tax free. You dont pay back the loan and you lose the 2% but you are still at 8% so the net in that payback year is 6%

    Am I understanding this correctly?

    Also, I believe you can easily move qualified retirement accounts to an insurance policy but what about non-retirement accounts?

    EX: a regular mutual fund (non-IRA) worth 50K

    If you moved it would you have to cash it in and then it would show as ordinary income? OUCH... or is there way it can transfer laterally without touching it ?

    thanks for all comments

    Cheers D

  • This is a bad idea. Buy a term policy and invest the rest. All it takes is some simple math to see that a passive portfolio of index fund stocks and bonds outperform this "system" significantly. If you want to be your own bank, simply save enough money and grow it through investments that you don't have to borrow ever again. "Bank on yourself" is just a catch phrase that sounds good but doesn't really mean anything. Save your money and invest.

  • Guys, speaking of finances, have you ever used services like ? I know that they are quite popular now but is it a legit thing?

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