Infinite Banking has a TikTok buzz, is it for you?

As you scroll through TikTok’s financial feed, you’ll come across viral videos about “infinity banking.” The concept has gained traction on social media, with celebrity endorsements such as rapper Waka Flocka Flame.

But infinite banks are nothing new. The term was coined by economist Nelson Nash in the 1980s and outlined in his 2000 book Becoming Your Own. Banker: unlock infinity banking concept. ” This strategy involves leveraging the cash value of certain life insurance policies, such as whole life insurance, and treating it as a private bank.

Nash promoted Infinity Bank as a path to financial freedom and wealth creation. But it’s a little more complicated than Waka Flocka Flame, tiktokers Claim.

How Infinite Banking works

Whole life insurance typically has a cash value component that lasts for the rest of your life and increases at a guaranteed percentage over time. This rate of return varies by insurer, but is typically around 5%. Tampa, floridaand founder of life insurance research firm Veralytic, said in an email.

Once enough cash value has been accumulated in the policy, the funds can begin to be loaned. This is where the concept of “self-pay” comes into play.

When you pay a premium for life insurance, a portion of the premium becomes a component of the insurance benefit. Infinity Banking goes one step further. Policyholders pour extra money into cash value to accelerate growth. They then treat it as a personal line of credit, borrowing against the cash value of the policy to pay for large purchases rather than relying on traditional lenders or pouring into savings.

But cash value life insurance can be complex and expensive, and infinite banks are a nuanced concept. For these reasons, Flagg says, it’s best suited for high-net-worth individuals with a correspondingly high risk tolerance.

change policy to private bank

This strategy has its perks. For example, you don’t have to qualify for a cash value loan the same way you would for a traditional loan. The money within the cash value policy is liquid and does not require the loan to be repaid by a specified date. However, if you don’t, the insurance company will deduct the amount you owe from your policy’s death benefit to pay less to your beneficiaries when you die.

Under Mugen Bank, the cash value is the collateral for the loan and life insurance is tied to it. This means you risk losing your coverage if you don’t look carefully at your cash value. Insurance companies also charge interest on cash value loans.

Daphne Jordan, Austin, Texas-based Certified Financial Planner and Wealth Advisor for Pioneer Wealth Management Group, said:

Additionally, infinite banks are expensive. For example, a 40-year-old man in good health would expect to pay an average of $7,028 a year for a $500,000 whole life policy. In most cases, premiums will be paid annually for the rest of your life.

Financial obligations don’t stop there. Infinity Banking only works if the policyholder exceeds the cash value. For her 40-year-old man in good health, this means donating more than his $7,028 in annual premiums. Infinity Banking typically allocates about 10% of your income to monthly cash value, but this is no small commitment.

Another drawback of Infinite Bank is time. It can take years or decades to build the cash value needed to initiate a loan without penalty.

think about your priorities

The primary purpose of life insurance is to leave money for your loved ones when you die, not to build a fortune.

For Jordan, creating wealth is a science, and it starts with taking care of the basics.

Consider paying off student loans, credit cards, and building an emergency savings fund. Open a high-yield savings account with a Federal Deposit Insurance Corporation (FDIC)-insured bank or a credit union sponsored by the National Credit Union (NCUA) and save enough money to cover three months of your life. Aim for cost.

Next comes focus on your retirement. Jordan recommends that he put at least 10% of his income into a tax-advanced retirement account, such as a 401(k) or Roth IRA, and then consider something like Infinity Bank.

“When I’m on a plane, I’m always told to put an oxygen mask on myself before helping others,” says Jordan.

“The way to build wealth is to save for the unexpected and save for your future self.”


This article was provided to The Associated Press by personal finance website NerdWallet. The content is intended for educational and informational purposes and does not constitute investment advice. Katia Iervasi is a writer for her NerdWallet. Her email:

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NerdWallet: Cash Value Life Insurance: Is It Right For You? Infinite Banking has a TikTok buzz, is it for you?

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