“What can you do if you're getting ready to roll over your 401k and retire in the next year or so, to protect the wealth you have built?”

If you haven’t heard of infinite banking yet, it’s one of my favorite ways to put my extra cash to work for me without worrying that I might lose it if the market crashes. 

Infinite Banking: a long-term financial strategy that involves over funding a life insurance policy so you can use it as a line of credit. 

With that said, here is how to use Infinite Banking in your own financial freedom strategy with pros and cons for each scenario! 👊

The way Infinite Banking works is simple:

1. You purchase a life insurance policy specifically structured for the Infinite Banking concept (not a term policy)

2. Instead of just paying the minimum monthly payment (called the premium), you over fund the policy to take advantage of the guaranteed cash value account included with your policy

3. After a designated period of time, you can borrow against the death benefit for up to 75% of the cash value in your account and use it to pay off high-interest debt, pay for your lifestyle in retirement, or purchase investments that will be used to pay off the policy loan

However, not all life insurance policies can do this. The infinite banking strategy has multiple advantages, but also a few cons you should know so you don’t misuse it.

With every episode of Fierce Feminine Finance, I like to empower you with a POWERFUL free resource that goes with the episode which you can implement right away to create some of the same results, if not better, in your business.

This week, since we are talking about ways to protect yourself while investing, I put together an Ultimate Guide To Becoming Financially Bulletproof so you know the best questions to ask your financial advisor.

After going through this freebie you will be able to identify what is working (and what isn't) in your financial plan right now. So you can take things to the next level!

You can download it right away by clicking here or on the photo above 👆

To understand how Infinite Banking fits in with your overall pathway to becoming independently wealthy, let’s take a few scenarios:

Scenario #1. You’re a long-time successful female entrepreneur who built a successful business that supports her family, but has no other investments.

Because you spent your 20s and 30s building your business, you have no 401(k) or other investments.

While you might be able to sell your business at age 65 and hope the sale brought you enough to buy an annuity or investments you could live on for the rest of your life in retirement…

…that is a risk you don’t feel comfortable taking, or your financial advisor has recommended you diversify and create a “Plan B”.

In this scenario, it would make sense to purchase life insurance, since you already have a need for it to protect your family, clients and employees in case something ever happened to you. 

And in addition to full coverage, if the policy is structured correctly it could also become a savings account that grows at a guaranteed rate of return to help you pay for college tuition, purchase investments, or even provide you with tax-free income in retirement to supplement whatever you earned by selling your business.

Because Infinite Banking uses life insurance instead of a 401k or IRA, there is no penalty for early withdrawal of the funds before age 59.5. And because of the way these policies are structured, even if the market crashes your savings are guaranteed against loss.

Scenario #2: You took out a high-interest loan to start your business and want to pay it back more quickly without losing so much money to interest.

If you have credit cards or business loans at 20% interest or higher, you know that paying them down can feel like one step forward two steps back! 

That interest is eating you alive but I have a solution that can help:

By purchasing a properly-structured life insurance policy and using your extra cash to over fund the policy while paying minimums on your credit cards, you can let compounding interest grow your cash until you have enough to negotiate or pay off your debts with a policy loan (which are typically much lower than credit card interest).  

And the best part?

The cash you put into the policy originally will continue to earn dividends while you borrow against it to pay off your debt! 

Scenario #3: You believe the economy might crash after you retire, and need a way to ensure you don’t lose all your hard-earned savings and investments

Approximately 10,000 Boomers are retiring every day in the United States. But if you watch the news, it can sometimes feel like we’re standing on the precipice of the next Great Depression! 

So what can you do if you’re getting ready to roll over your 401(k) and retire in the next year or so, to protect the wealth you have built?

I learned this particular use of Infinite Banking in the book The Volatility Shield by David McKnight. Here is a great video by David himself on this concept:

Crazy right? When I learned this strategy, my first thought was, “Why don’t more people talk about this??”

Because they don’t know. Or worse, they’ve been misled by online money “gurus” to believe that Infinite Banking doesn’t work.

It DOES work. Just do the math. But it isn’t for everyone. 

So let’s talk about a scenario where Infinite Banking might be a bad or even terrible idea:

Scenario #4: You Don’t Know Much About Investing And Want To Put All Your Extra Cash Somewhere “Safe”

Sometimes unethical or ignorant life insurance agents have been known to sell their clients on the idea that they should save all their money in a whole life insurance policy and call that “Infinite Banking”. 

This is foolhardy as it violates a basic investing principle = diversification.

Like any other tool in your toolkit for achieving financial freedom, Infinite Banking is only useful if you understand how it works and what it can do… and what it CAN’T do. 

It can’t entirely replace your need to invest anywhere else.

Because these insurance policies have a guaranteed rate of return, the insurance policy can safely say you won’t lose money. 

But…

Like all good financial products, there are checks and balances against that benefit. 

In this case, most insurance policies structured for the Infinite Banking strategy also have a “cap” – ie, a limit to how high your earnings can go in a given year. 

So for instance if your earnings are tied to the S&P 500 (as is the case in some indexed universal life insurance policies) and the S&P goes up 20% that year, in most policies you will get between 10-15% of that growth… and the insurance company will keep the difference. 

Whereas, if you had an Infinite Banking policy AND an IRA, that year the money in your IRA would earn more interest than your cash value insurance policy did. 

But…

In the year when the S&P 500 loses 30%...

Your IRA would lose all it had gained. Yet your cash value insurance policy would not lose a dime of what you had gained because its guaranteed against loss. 

That’s why David McKnight called Infinite Banking a volatility shield.

In Summary

Want to learn more about how Infinite Banking works, how to structure your policy for maximum potential, and figure out whether this strategy is right for you? 

Book your free consultation with the Fierce Feminine Finance team.