engineered financial strategies

Infinite Banking – What it is and Why You Want to Know All About it By Jeffrey Milkey

Infinite Banking – What it is and Why You Want to Know All About it

By Jeffrey Milkey

A few years back I was sitting in my wife’s broker’s office. She was selling annuities and doing quite well and we were talking about the recession and how tough things are out there for so many people. Dede’s broker Ted, asked us if we had ever heard of Infinite Banking? We both said we had not and Ted gave a little laugh and pulled out a book called “Becoming Your Own BANKER” “Unlock the Infinite Banking Concept” by R. Nelson Nash. He said it is amazing how many people have never heard of Infinite Banking and told me to read it and then asked me to come back and talk to him afterwards.

Dede has worked in the banking and investments industry most of her life and holds Series 7, 65, 63, 6, 8 (9 &10), without mentioning her Real Estate and Insurance Licenses. My wife and I are investors and we have owned a few businesses in the past as well. I’m a Mechanical Engineer and work as a Software Engineering Consultant for a large firm out East and to be totally honest, we were a little embarrassed to have not heard of this financial strategy.

To say I was blown away by what I learned would be the understatement of the millennium. Periodically I come across something that gives me a mental rush but this idea really touched off a wildfire in my mind.

Much has happened since that day, much has changed in my life and how I think about and approach finances.

So stick with me here as I simply and concisely outline the concepts of Infinite Banking for you and let’s see if you have the same response that I had.


Infinite Banking – Key Concepts


I’m going to ask you one favor as you read this next section. We all have preconceived notions of how things work. The truth is, when it comes to finances, investing and insurance…not everything is as it seems and very probably you have not been exposed to the whole story.

First and foremost, I would like to point out that this concept, Infinite Banking, has “nothing to do with investing”, it has everything to do with financing and a money management process or strategy.

∙ The Infinite Banking Concept involves buying a permanent life insurance policy that is intentionally designed to minimize the cost of insurance and maximize your ability to build large cash values.

∙ Policy cash values are immediately available to you the policy owner for loans.

∙ Policy loans tend to be available at very favorable interest rates and terms, despite economic conditions and without any need to “qualify”.

∙ As long as you have cash values available, one quick phone call and you’ve qualified! The insurance company will put a check in the mail or wire funds to you, for whatever amount you desire up to the extent of your policy’s available cash values. 




1/3 Goes for Insurance




2/3 Goes Towards Cash Value

Key Concept Figure 1.


Example: Annual Funding of your Infinite Banking Account The money you place in your banking account that goes towards cash value actually does 3 things:

  1. Earns Guaranteed Returns
  2. Is available to you for loans
  3. Purchases additional Insurance

When I learned this it made my head spin. I kept thinking, I want to find ways to put as much of this additional money that goes towards my cash value, into my policy as I can.

This also helped me to understand how the face value or payout of my insurance policy continues to grow every year. All the money that I put in my policy over and above what I agreed to pay for insurance goes to buy more insurance but also enjoys these other benefits!

Why is the term “Banking” being used, this isn’t about creating a real physical bricks and mortar bank is it? This is called Infinite Banking because you, just like a bank, are creating a pool of money that you now own and control.

I know what you are thinking, why would I pay a Life Insurance company my money just to borrow it?? THE ONE MAJOR DIFFERENCE that a quality permanent life insurance policy offers that sets it a world apart from each and every other option is that a properly engineered life insurance policy pays you interest and dividends* on your cash values EVEN IF YOU HAVE BORROWED THEM OUT. In other words, you’ve now found a way to make your money work for you in two places at the same time.

*All the cash you put in your policy has a guaranteed interest rate that is paid every year and you will never lose your principal. Dividends are not guaranteed like interest is, but dividends have been paid each year over the last 100 years + by the insurance companies that are being used by reputable agents.

Let’s consider one more concept and then summarize.

Most people, even wealthy people, finance many things. You either finance by:

  1. Paying interest to someone else – a bank, lender, etc. Lost Interest.
  2. Or give up interest you could have earned if you put your money to work. (In other words, when you pay cash, the interest that the money could have earned is gone.) This is commonly called Opportunity Cost.

When you own and control your own pool of money, it would make a lot of sense to use it for your own benefit. You have bills and debts that you have specific payments set aside for each month. Here is where the revelation comes…..

Transfer your debts to your own bank.

You want to be putting as much money as you can back into your own bank. So payoff Credit Cards and Car Loans with the cash in your own bank and make the payments you were making (Principal and Interest) to yourself! Are you starting to see how you can capture the interest that you were paying to someone else to yourself?


  1. All the money you put into your infinite banking account receives a guaranteed return.
  2. All the money you put into your infinite banking account receives dividends.
  3. Even if you use the cash value in your policy, you are still paid your returns on the entire deposited amount as if it was all still in the policy.
  4. As you pour more and more money into your banking system, you receive more and more guaranteed returns.
  5. Now your rate of return in your own bank is increased to what the Insurance Company has promised to pay you plus the interest rates you were paying to outside banks and lenders.
  6. As cash is paid back into your banking policy, you can reuse that money to pay off more debt and transfer more of your debt into your own bank.


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The icing on the cake.

This all sounded pretty good to me and the more I investigated the better this strategy became. These last facts should bring a smile to your face.

  1. All the growth in your policy occurs tax free.
  2. In many states, the money in your banking policy is safe from lawsuit and judgments.
  3. Since you own your banking policy all the money in it can pass untaxed to the next generation.
  4. Once you have grown your banking policy to a very large amount, the returns become a tax free retirement income.
  5. Insurance Policies become more efficient over time and become self-funding.