Who is the ideal candidate for IBC (and who should avoid it)
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Ever wonder why some people absolutely thrive with the Infinite Banking Concept while others seem to struggle to get started? As much as I hate to admit it, the surprising truth is that IBC isn't for everybody. But the list of who IBC is not for is a lot shorter than the list of who it is for.
Who should avoid Infinite Banking
The main type of person who IBC is definitely not for is someone who really cannot or will not have the ability to think long-range. This isn't meant as a criticism—there could be legitimate reasons why someone is currently unable to have a long-term mindset:
You might be in a situation with very high expenses for a period of time
Your income might have been recently affected
You have something on the horizon that will require a lot of capital
In these scenarios, it may not be the best time to start IBC because of the capitalization period required to start a whole life insurance policy.
However, there are also people who simply aren't thinking long-range for no good reason at all. Nelson Nash talks about this in his book, "Becoming Your Own Banker." One of the key mindset requirements is the ability to think long-range because what we're doing is strategically capitalizing—saving money in a way that gives us strategic advantage.
The hallmark traits of strategic thinking
One of the hallmarks of being strategic is the willingness to forego immediate gratification to create a better future outcome, often with less effort. But that's the thing—you have to be willing to make that trade-off to have a better outcome with less effort. That's what we're doing with IBC in a nutshell.
Think about anything of value—it's almost always a long-term play:
When you first start in a career, would you expect to make top dollar immediately? Of course not. You start at entry level, learn the job, get good at it, and years later, when you warrant it, you earn a top salary.
Starting a business? Would anyone expect to get all their startup capital back a month later? No way. VCs typically look at 10-year horizons before expecting returns.
When building a house, what we WANT is the living space, the pool, the beautiful landscaping. But if you actually built those things first, they'd end up being destroyed when equipment & supplies arrived to build the required foundation.
This is a decent analogy for what happens to people's money when they try to get rich without building their financial foundation. If any one thing happens outside of the plan, the whole plan blows up.
So who is IBC ideal for?
There are really only two questions you need to ask yourself to determine whether IBC is ideal for you:
Do you want maximum control over your money?
Do you want to be strategic?
The typical way of doing things, might present you with some ability to be strategic, but it gives you very little, if any, control. When you don't control your access to capital, you must seek permission from those who do have control - the banks and other financial institutions.
Let's look at four specific scenarios where IBC creates tremendous value:
1. For those wanting "forced savings" (that they can actually get to)
I'll share my personal experience. At 38, I woke up to an overdraft notification on my phone. There I was, a grown man making good money and having a good career in tech ...bouncing checks??
This wake-up call led me to get my financial house in order.
After discovering IBC through one of Bob Murphy's economics articles, I implemented it and solved almost every problem I had with money. It started as forced savings, but unlike 401(k)s where money was locked away, I now had a place to save where I could actually access my money if needed.
I am convinced that the ability to access money when needed is our #1 problem.
Consider that 90% of people who retired in 2023 had less than $1M saved. This suggests that many people either couldn't consistently fund their retirement accounts or had to liquidate them when life happened. IBC provides a superior way to save money that you can actually access when needed without penalties.
2. For Those Looking to Eliminate High-Interest Debt
One of the biggest costs in our financial lives is debt service. IBC provides a way to more efficiently pay down debt with much more control.
Most people prioritize sending money to financial institutions to get out of debt faster. The problem is that when they're done, they don't have any money! They sent it all the the financial institutions. Because of this, they often fall right back into debt when something goes wrong.
With IBC, you can trade high-interest debt (like 20% credit cards) for lower-interest policy loans (around 6%) that you can pay back according to your own schedule. You're in control and when you're done, you're not only out of debt, but you also have money saved.
A quick note about rates: They matter! I see so many people trying to pay off their mortgage as quickly as possible. But it just doesn't make sense to use 6% policy loans to pay off 3% mortgage debt. You're better off directing that additional cash flow to something that grows at great than 3% (which is not hard to do!).
3. For managing large expenses
An even bigger cost throughout our lives is actual expenses, especially large ones like buying cars, paying for college, vacations, property taxes, etc.
(Here's a $14M conversation regarding this)
IBC gives us a way to manage these larger expenses by allowing us to save, pay for them with policy loans, then pay the loans back according to our own schedule. Since we didn't spend our own money but used it as collateral, we never lose the growth on it.
This minimizes the lost opportunity cost of these purchases. If you want to see my model for what I call "Recurring Expense Funds," check out my online course, "IBC Mastery" at stackedlife.com/ibcmastery.
4. For enhancing investment returns
There are two primary ways IBC enhances investments:
First, it creates certainty. Most people have their entire financial lives exposed to risk. By owning whole life insurance, you have at least one portion of your finances that's guaranteed. This gives you a kind of "permission slip" to take some risk in other areas.
Second, it provides leverage through policy loans. Banks take deposits, pay depositors a small interest rate, then lend that money at a higher rate, capturing the spread. We can do the same thing!
By capitalizing whole life, we get no-questions-asked access to credit via policy loans. We can borrow from the insurance company at a lower rate (say 5%), buy an asset that returns more (say 10%), and capture the spread. If we pay $5 to earn $10, that's doubling our money—a 100% return. All while our cash value grows uninterrupted.
When we start paying the policy loan back, it frees up the credit line again so we can reuse it, over and over.
This is partly where my company name "StackedLife" comes from. By starting with whole life insurance, we can add layers (a "stack") of low-risk growth using the same money repeatedly. If we can recycle money five times, for example, earning 4% in each layer of the "stack," that's effectively a 20% return with very little risk.
The bigger picture
By stacking layers of assets, you create a kind of geometric compounding—compounding your compound growth. It starts off a little more slowly but soon creates massive acceleration in your financial life that you can't get anywhere else -- all with more control, less risk, and potentially less tax.
Whether you're just getting started financially or already a seasoned investor, taking the time to build a better foundation with IBC will pay dividends over the long run. And I'm not talking about making things just a little better—I'm talking hundreds of thousands or even millions of dollars, depending on your level.
Learn more:
Listen to StackedLife Podcast Episode 6 on YouTube, StackedLifePodcast.com, or wherever you listen to your podcasts.
Want to learn more about how whole life insurance cash value could fit into your financial picture? Schedule a free consultation about implementing these strategies in your own life.
