Infinite banking is a financial strategy that involves using a whole life insurance policy as a personal bank. The idea is that instead of putting money into traditional savings or investment accounts, the policyholder pays premiums into a whole life insurance policy, which then accumulates a cash value over time. The policyholder can then use the policy's cash value to make loans to themselves, effectively using their life insurance policy as a source of borrowing.
Proponents of infinite banking argue that this strategy offers several benefits over traditional banking methods. For example, they argue that the interest paid on loans from the policy's cash value is often lower than the interest paid on loans from traditional banks, and that the money borrowed from the policy's cash value is tax-free. Additionally, they argue that the cash value of a whole life insurance policy is generally considered to be more secure than other forms of investment, since it is backed by the assets of the insurance company.
It's important to note that infinite banking is a complex strategy that may not be suitable for everyone. There are many factors to consider, such as the policyholder's age, financial goals, and risk tolerance. Additionally, there are often significant costs associated with whole life insurance policies, such as premiums, administrative fees, and policy charges, which can eat into the policy's cash value over time.
Before deciding to pursue infinite banking, it's important to carefully consider the costs and benefits, and to seek the advice of a qualified financial advisor. The advisor can help evaluate whether this strategy is a good fit for an individual's unique circumstances and financial goals.