Infinite banking

Infinite Banking and Little-Known Implications

Would you like to grow your money tax free? Would you like to access your money without paying tax? The financial strategy known as infinite bank may be what you’re looking for. However, you should be aware of some downsides before proceeding. This article, Infinite Banking and Little-Known Implications shares what might not be explained.

What Is Infinite Banking?

The idea of infinite banking has been around for more than a century. You buy a life insurance policy that accumulates a cash value. Typically, these life insurance policies are expensive compared to term life insurance. Theoretically, over time the cash value of the policy increases to an amount you borrow against.

How Does Infinite Banking Work?

Life insurance policies have unique features and special treatment compared to other financial accounts and products. Cash value in life insurance policies grows without immediate taxation. The money you receive from the policy as a loan is tax free. You pay interest on the loan, and the money continues to grow. Using this strategy you don’t need to qualify for the loan like you otherwise would in the banking system.

What Do I Need To Know About Infinite Banking?

Infinite banking might not be the best strategy to meet your financial goals. As mentioned above, premiums for life insurance policies that accumulate cash value are higher cost. You likely won’t have enough insurance coverage with this approach. The fees and expenses that are part of the policy reduce the earnings produced by the investments. Your income may not support the use of this strategy. Before considering this strategy, make sure you have an emergency fund. Additionally, ask yourself am I saving enough for retirement, and can I pay my fixed expenses.

How Can I Learn More?

To learn more about how we can help you avoid the pitfalls of infinite banking, schedule a consultation. Together, let’s find out if what steps need to be taken during your journey, to and through, a happy retirement. Contact us at (443) 906-1565 or mark@sentinelfp.com today!

About Mark

Mark Humphries, CFP® is the owner and financial advisor at Sentinel Financial Planning, a boutique, veteran-owned and operated investment management and financial planning firm. Mark focuses on helping federal government employees, military members, and business owners manage their investments and plan for retirement. As a former military service member and federal employee with over 10 years in the financial industry, he is familiar with the Federal Employee Retirement System (FERS) and the Thrift Savings Plan (TSP) and is uniquely qualified to serve his clientele.