You may have heard about infinite banking.  OPM (Other People's Money) is a similar concept. The only difference is OPM is using a loan from somewhere outside of the life insurance company. We are using a loan from a bank.

 

To give you an overview, OPM strategy is for you if you care about:

 

• Tax free income

• You want to retire sooner

• You’d like immediate access to your money

• You want to grow your money safely and leave money behind

• If you’d like money that’s creditor safe and it can’t be taken from you even in a lawsuit

• Uncle Sam can’t tax you

• 0% floor so you have 100% market protection while the potential to grow your money

• If you want to dual purpose your money.

 

Let me explain it in a way that you might already be familiar with: Home equity line of credit.

 

First you put some money down to buy a house. Second: The house builds equity. Third: You take out a line of credit and you can use it as income or re-invest into another property or another financial product.

 

We’re going to do the same thing, but use permanent life insurance. 

 

Why Life Insurance?

Life insurance is considered a Tier 1 Investment. When you compare financial products out there Life Insurance has 0% market risk. In other words, the money you put in there will NEVER go down. It can go up, but it won’t go down.

 

Also, the money you pull out of your life insurance cash value when taken out as a loan is 100% tax free. How is that? It’s money given to you as a loan. Loans aren’t taxed.  

 

Now I’ll take you through the 5 steps for this strategy:

 

Step 1: Pay premiums annually. Depending on how much you want to fund it, you can fund it for 2 years only paid annually. 

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Step 2: Cash Value grows

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Step 3: Take out a Cash Value Line of credit from the bank (OPM) using the cash value you have as collateral. In other words, you will show the bank, “I have this much cash value” and they will give you a loan. When you take a loan out from the insurance company, it's an infinite banking concept.  When you take a loan from a bank, you’re using Other People’s Money.

 

Why would you use a bank? The reason you would want to borrow from a bank versus the insurance company is if the interest rate is lower than the insurance company so your spreads are higher. Life insurance interest rates should be 5% or lower. Take a look at your life insurance contract for details on loan interest amount.

  

Step 4: Use the loan to: Continue payments on the policy, use it as income, and more investing!

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Step 5: Invest into real estate, high performing CDs, other IULs, stocks, etc.

 

When you’re ready to retire, you will use loans from the insurance company. You allow your cash value to continue growing and use a loan as income. Of course, a loan is non-taxable so all this retirement money won’t be taxed. You will use your death benefit as collateral. You won’t need to pay back these loans. When you die, the insurance company will keep a part of the death benefit and the rest will go to your beneficiaries. 

 

The death benefit will always be higher than the cash value.  The cash value will always be higher than the amount you take as income.  The amount you take as income will always be higher than the amount of money you put into your policy. 

 

Banks take our money and loan it out or use it for investments and give us a measly 1% unless you are using a high interest rate bank. Infinite banking and OPM allows you to put my money with insurance company, take out loans and reinvest it into your own account.

 

Since you’re borrowing at a lower rate than what you’re earning, the money continues to grow and you can do it every year. 

 

If you have cash value in your policy, or you have some money to invest and want to become your own bank, time to look at Step 2 in your investment plan!