Infinite Banking Opinions

[Galaril]

I have a close friend who is in the Financial Education/ planning business for a company and he has me looking into the Infinite banking stuff for long term retirement and was curious if others more knowledge than me in investing money wisely have gone this route or not. I would love to here the various insights into it. It all sounds too good to be true.

[DaddyTorgo]

I have a close friend who is in the Financial Education/ planning business for a company and he has me looking into the Infinite banking stuff for long term retirement and was curious if others more knowledge than me in investing money wisely have gone this route or not. I would love to here the various insights into it. It all sounds too good to be true.

Hmmm? More info please!

[Logan]

Well, I've never heard of it, and after googling the phrase and a quick look at the top site it takes me to, I would say to stick with your last sentence.

[DaddyTorgo]

Ditto. I googled and took two seconds to look at it and go "hmm...too good to be true."

http://forums.kiplinger.com/showthread.php?t=10496&page=3&pp=15 (http://forums.kiplinger.com/showthread.php?t=10496&page=3&pp=15)

Enjoy Your Money!: Infinite Banking and Bank on Yourself: Scams or Wise Investments? (http://enjoyyourmoney.blogspot.com/2010/03/infinite-banking-and-bank-on-yourself.html)

[Galaril]

It basically boils down to getting whole life insurance which is high premiums and gives you the death benefit for as family members as well as the ability to borrow against the loan. Neither of these is a great concern to me. I am in excellent health and get a low premium for a large term life policy now that protects my family if I die. In doing more research it appears to be more common these days as it is a fairly low risk conservative vehicle but it does put all your eggs in one basket potentially. The risk there obviously being if the insurance company goes belly up like AIG almost did.

[Lathum]

What you really should be asking is can you fudge their statements?

[Galaril]

A thorough breakdown of this I found here but not for the faint of heart:
The Visible Policy: Participating Whole Life Insurance Explained (http://r0k.us/insurance/vp/)

[SportsDino]

My standard answer is do not buy nothing you do not fully understand.

Banker types are always going to point you to some fad and promise you the sky. California and many other cities and other local governments are learning this for instance in the form of the interest rate-swap game (why are the derivative markets leveraged into the trillions, its not really hedging, its the dumb money in big managed funds with corruptable agents like politicians who take your money in some form and pledge it to be the loser in a zero-sum betting game, and tell you its a magic money machine).

Short answer for this particular question, no... don't do it, unless you are in the market for life insurance anyway. There is no such thing as an infinite bank, sadly the way to get ahead is the old fashioned way, manage your expenses and build your revenues. From my brief review of the hype (I am not familiar with this particular scam) it looks like they are marketing this to people with credit needs who would be 'infinitely better off' if they just learned to not max out their credit cards.

If there is interest and I could get a copy of the legal language on one of these I could figure out the math on who wins under what situations. Since insurance is a bet between you and the insurer (and the insurer's investment ability to earn a return on assets which they are not giving to you because they are not a charity) there is always a winner and a loser of the zero-sum game being played. To fully understand it you may need to be able to break down issues such as default scenarios and their associated risk (indeed life insurance itself is all about humanity's ultimate default and its timing!).

[Galaril]

My standard answer is do not buy nothing you do not fully understand.

Banker types are always going to point you to some fad and promise you the sky. California and many other cities and other local governments are learning this for instance in the form of the interest rate-swap game (why are the derivative markets leveraged into the trillions, its not really hedging, its the dumb money in big managed funds with corruptable agents like politicians who take your money in some form and pledge it to be the loser in a zero-sum betting game, and tell you its a magic money machine).

Short answer for this particular question, no... don't do it, unless you are in the market for life insurance anyway. There is no such thing as an infinite bank, sadly the way to get ahead is the old fashioned way, manage your expenses and build your revenues. From my brief review of the hype (I am not familiar with this particular scam) it looks like they are marketing this to people with credit needs who would be 'infinitely better off' if they just learned to not max out their credit cards.

If there is interest and I could get a copy of the legal language on one of these I could figure out the math on who wins under what situations. Since insurance is a bet between you and the insurer (and the insurer's investment ability to earn a return on assets which they are not giving to you because they are not a charity) there is always a winner and a loser of the zero-sum game being played. To fully understand it you may need to be able to break down issues such as default scenarios and their associated risk (indeed life insurance itself is all about humanity's ultimate default and its timing!).
Good points. Since I have plenty of insurance and I don't have any credit problems or any credit card debt I agree this is not what I am looking for. I will stick to things I know and trust maybe annuities some market stuff and Roth's as well as the good ole money market accounts.

[dzilla77]

What you really should be asking is can you fudge their statements?

Yeah, but you have to do it continuously.