Content: Page 61, BECOMING YOUR OWN BANKER – The Infinite Banking Concept.
Please turn to page 61 in your copy of the book. In this instance the young logger says to the life insurance agent, “This is getting better! Is it possible to finance three trucks through this system?”
“Yes,” replies the agent, “It is theoretically possible to do so – but you must stagger the purchases throughout the year to be able to do it.”
Looking at illustration 4 on this page you can see how it is done.
As in the last two examples, beginning at the end of the first four years he makes the policy loans and then repeats the process every four years to replace the worn out vehicles, this time in the amount of $157,800 and makes repayments of $54,000 per year back to the policy. He is playing “honest banker” with himself.
Now, check out the results as we did in the last two situations. At age 65 his cash value is $2,928,933. That’s an improvement of $469,355 over the last example. This is capable of increasing his retirement another $25,000 per year to $175,000. Every time he adds another truck to the financing process, you will notice, he makes nearly a half million dollars of tax-deferred accumulations and adds $25,000 to his retirement income stream.
Assuming death at age 85, add up all that income he has received and it comes to $2,675,959 plus all the money he has put into the policy – and he still delivers $5,085,958 to his beneficiary. That is a total of $7,761,917 in benefits. And remember, he doesn’t have a thing invested in the policy after drawing out the first five years of retirement income.
There are several other things that we need to take into consideration. Suppose that he elects to draw out $250,000 per year in retirement income at age 66. There is nothing to prevent him from doing so. He owns the policy and it is his decision. But, if he does this it will diminish the results on the right side of the page, namely the cash value and death benefit columns. It is his option to make such decisions.
Here’s a matter we haven’t talked about. Take a look at the dividend on page 61 at his age 65. It is highlighted in the Total Dividend column.
It was $140,279 that year. Now, turn back to page 54 – the illustration where the life insurance company managed it all – and find the dividend that same year. It is $71,942. The dividend is twice as much in the example where he financed three trucks through the system. Do you realize that the life insurance company’s dividend scale did not change! Again, this increased dividend performance was the result of how the policy owner behaved, not because of something the company did.
Another item is the creation of these illustrations that help you to see what is going on. They are not easily constructed. You must “get into the brain” of the software designer and think like he does and then convert that information to your own needs. Candidly speaking, you cannot create comparable illustrations with a number of insurance companies because of this fact. The software engineer at that company just doesn’t think this way. That doesn’t mean that the results you are studying here cannot be done with that company.
For instance, back in Part I of this course I told you of a policy that I bought in 1959 whose current dividend is now eight times the annual premium. There were no computers in 1959. There was no such thing as an illustration. Yet, everything I am teaching in this course was possible. All it really takes is the basic knowledge of what is going on in the process of creating a life insurance policy, knowledge of how a mutual insurance company works, and some imagination. The fact that all this could have been done during the last 200 years and no one told me about it ticks me off! Life would have been so much better had I known this. Why didn’t the life insurance companies teach me?
Lastly, the “interest” that the logger is paying in this series of illustrations is not really interest. It is additional premium (capital) that the policy is capable of receiving which equals the interest that he was paying the finance company. That is the reason that it is adding to the cost basis of the policy and that he can recoup at retirement time without taxation. Until he recovers the cost basis of the policy, that income is not taxed.
Yes, there is interest involved with the policy loans here, but it is being paid with additional dividend withdrawals and it does not show up on these illustrations.
In the next lesson, we are going to learn a lot, so prepare for it! I’ll see you then.