Blog 108 – Infinite Banking Policies Versus Qualified Plans

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We are going to compare Infinite Banking (IBC) policies to qualified plans in four key issues: 1) control of your money, 2) guarantees and predictability, 3) taking a loan, and 4) taking retirement income.

Control of your money.

When you contribute to a qualified plan, the government, the retirement plan administrator and/or the employer, determines what you can invest in, how much you can invest depending on your age and/or income, when you can withdraw it, and what taxes and fees you’ll pay for withdrawing earlier. Of course, the government can and does change the rules!

When you contribute to an IBC policy, you and only you, are in control of your money. You determine how much to contribute to your policy, limited only by its design, and you determine when and how much you can withdraw or borrow from your policy. The insurance company that issues your IBC policy cannot change these rules!

Guarantees and predictability.

Since your qualified plan invests mainly in the market, there are absolutely no guarantees or predictability of where your account is going to be at any point in time. As a matter of fact, you could lose part, or all your money, and it may happen close to your retirement; does this give you the peace of mind that you look forward to in your golden years?

With an IBC policy your cash value grows in a guaranteed and predictable way year after year so at any given time you know the minimum guaranteed cash value that you will have in your policy. Your cash value is always increasing, and it never decreases. In addition, although not guaranteed, your policy will earn dividends that will make your cash value grow even more. As a note, the mutual life insurers that we use have never failed to declare dividends in substantially more than 150 years.

Taking a loan.

When you take a loan from a qualified plan, if the plan allows it, involves liquidating assets from your plan and therefore, you will immediately stop earning investment income on those assets, assuming you are earning anything. Furthermore, you are required to pay the loans back within five years, or the outstanding balance becomes taxable, and you may also have to pay a 10% penalty if you are under the age of 59½. Also be careful if you change jobs before reaching age 59½ since in most cases you are required to pay your loans back in full with interest in 30 to 60 days, or you will have to pay income taxes on it, plus a 10% penalty. Unfortunately, a qualified plan makes a terrible emergency fund. Remember, the amount of your loan is no longer invested and therefore, it is not earning anything!

When you take a loan from an IBC policy, you are borrowing against your cash value, using it as collateral for your loan. The amount of cash that you receive as a loan does not actually come from the cash value of your policy, but from the general account of the insurance company so the cash value in your policy continues to earn guaranteed interest and dividends while the loan is outstanding. Also, you are in complete control in how and when you pay your loan back. Remember, the amount of your loan continues to earn interest and dividends!

Taking retirement income.

Although it is supposed to be your money, you may only withdraw money from your qualified plan without paying penalties between the ages of 59½ and 73. That’s right, for only 13½ years! Before age 59½ you will have to pay a 10% penalty and after age 73 you are required to take distributions whether you need them or not.  If you don’t take distributions, you are penalized with 50% of the difference between what you were supposed to take and what you actually took. And you thought it was your money!

You can take withdrawals and loans from your IBC policy when and how you wish. There are no penalties for early, late, or no withdrawals or loans. You always have use and control of your money; in fact, your retirement income is income tax free!

If you need during your retirement years to have access to, let’s say $100,000 per year, and you are in the 28% tax bracket, you will need to withdraw from your qualified plan $138,889 per year so that after you pay taxes you still have access to the $100,000 that you need. It follows that accumulating your cash value in an IBC policy is more cash efficient than accumulating your cash in a qualified plan!

If you would like to learn how you can grow a substantial amount of cash that you have access to at any time without penalties, is unrelated to the stock market, and will generate income that is not included in your tax return, visit our website at or feel free to email us your questions at or call us toll-free at 1-844-443-8422.

Isis B. Palicio, LUTCF, MBA
Pedro A. Palicio, MBA, Ph.D.
Infinite Banking Concepts® Authorized Practitioners

We are experts in designing high cash value dividend-paying whole life policies.

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