With everything going on in the world right now, most of us are barely aware of what day it is (I forgot it was Easter this weekend until someone reminded me on Friday!) - so it's not surprising that tax season has crept up on us without warning this year. Fortunately, the deadline has been extended until July, so I don't have to freak out about getting ours done this weekend.
However, I thought it would be a good time to address a financial topic this week, especially as so many people are currently in financial turmoil, laid off, working part time, or simply watching as their stock portfolios plunge in a sickening roller coaster ride of volatility.
Fortunately, at least the latter aspect is not much of a concern for me or for most our clients at the office, since so many of us utilize Bank On Yourself® as an integral part of our financial plan. While there is not a lot we can do to prevent our clients from losing their jobs, at least the plans we design for them can help keep them from losing their shirts in the market!
A prospective client recently asked me what are the main benefits of the Bank On Yourself strategy, and after taking the time to enumerate the three aspects that are most important to me, I thought it might be fun to share my response with you as well. Read on to find out why I'm such a huge proponent of Bank On Yourself, and why I choose this method over all the other popular financial vehicles out there as the core of my financial plan.
However, I thought it would be a good time to address a financial topic this week, especially as so many people are currently in financial turmoil, laid off, working part time, or simply watching as their stock portfolios plunge in a sickening roller coaster ride of volatility.
Fortunately, at least the latter aspect is not much of a concern for me or for most our clients at the office, since so many of us utilize Bank On Yourself® as an integral part of our financial plan. While there is not a lot we can do to prevent our clients from losing their jobs, at least the plans we design for them can help keep them from losing their shirts in the market!
A prospective client recently asked me what are the main benefits of the Bank On Yourself strategy, and after taking the time to enumerate the three aspects that are most important to me, I thought it might be fun to share my response with you as well. Read on to find out why I'm such a huge proponent of Bank On Yourself, and why I choose this method over all the other popular financial vehicles out there as the core of my financial plan.
Firstly, a little disclaimer: I am not a financial advisor (although though I do work for a financial advisory office). The information below is strictly my own opinion and my own experience as a Bank On Yourself user myself for over 15 years, and should not be considered as financial advice. If you would like to learn more about Bank On Yourself, please use the links below. Before starting your own Bank On Yourself plan, you should be sure to consult with a Certified Bank On Yourself Advisor who has experience with designing these special policies. Most financial advisors are not familiar with this strategy or the very specific products necessary to make it work correctly. Having your policy set up incorrectly could cause you to lose any or all of the benefits listed below, and may have potential tax consequences.
Okay, with that out of the way, let's dive in!
Here are the 3 main reasons why I, personally, practice the Bank On Yourself strategy:
1. Its Growth Is Promise-Based Rather than Risk-Based.
I recently heard this phrase ("promise-based"), and realized that this is the main reason why I use Bank On Yourself. While most financial/retirement plans are invested in risk-based vehicles, Bank On Yourself belongs to a class of financial products that provides promises of long-term performance - unlike the stock market. (As you can imagine, I am especially happy about it in volatile times like these!) This is very important to me, as I don’t really want to have to be worried about what my portfolio is doing from day to day. I also really don’t like the thought of having no control over the performance of my money.
Since I am still quite a ways from retirement, I’m not necessarily looking for double-digit returns, and would rather have steady, predictable growth (with no losses) that I can count on over a long period of time, which is what my Bank On Yourself policies provide.
2. Bank On Yourself Offers Liquidity.
As someone who is still in my main working (and spending) years - and as a Christian - being able to finance my lifestyle without taking on a lot of consumer debt is very important to me. In the past 15 years, I have been able to finance more things than I can even remember or count using my policies! Just a few of them include: taxes and medical bills, our wedding and honeymoon, a down payment on our house, vacations, cars, and numerous large home improvement projects – most recently our new metal roof last year. All of these things were paid for using my policies.
We automatically make payments back to the policies every month, just like we would if financing all of these things from an outside source, except the interest rate is reasonably low and fixed, and every payment we make back into the policy increases our available funds for future purchases and/or future retirement needs, rather than seeing those dollars just disappear forever.
Having this kind of control and liquidity is priceless to me, and I'm not aware of any other financial tool that will allow me to do this - especially while also providing the other two benefits I have listed here.
3. Bank On Yourself Offers Substantial Tax Advantages.
Other than Social Security (and who knows what that will be like by the time I retire?), my Bank On Yourself policies will be my main source of retirement income. Although I don’t get a tax deduction for the money we put into my policies now, by properly managing and funding these over the years, I will be able to take tax-free income from my policies in retirement, which is more important to me in the long run, since I have no idea what taxes are going to be like in the future. Since we have been at historically low tax rates for several decades now, I’m guessing they will at some point go up.
Another interesting fact about Bank On Yourself policies is that if you pull money out as an income stream in retirement, it does not count in the provisional income calculation for Social Security, which means I will have less tax due on my Social Security benefit – just another neat way to lower taxes in retirement that many people aren’t aware of!
There are a number of other useful benefits to the Bank On Yourself strategy as well, such as creditor protection, the ability to pass down inter-generational wealth or be philanthropic, succession planning and access to capital for business owners, and more. The three benefits above are just my own personal top 3 reasons for using Bank On Yourself. However, in my experience working for a Bank On Yourself advisory practice for the past 14+ years, my list above comprises the three main reasons why so many other people also choose Bank On Yourself over other financial strategies.
Now, if you have looked into the Bank On Yourself concept in any detail yourself, you may have come up with the main objection which many people who don't understand these policies usually bring up: the fact that it's based on a life insurance product. I realize that many people have an odd bias against life insurance (mostly because they aren’t familiar with how it really works – and especially with the specific type of policies we use for the Bank On Yourself strategy).
In response to that, I would just like to ask you a question:
If you are looking for specific benefits and features that will help you achieve your personal financial goals, which is more important: that you arrive at your desired destination, or what vehicle you take to get there?
Only you can answer that question for yourself, and maybe you have a different view than me, but personally, I really don’t care what it’s called – I just like having the benefits I listed above! (In fact, if I knew of something else that would give me ALL three of those benefits, I’m sure I would consider doing that instead.)
If you simply can't get past this and you care more about the fact that it is life insurance than you do about having all of the benefits I have listed, then Bank On Yourself probably is not for you.
Maybe you are wondering if you could practice the Bank On Yourself strategy using a different financial vehicle? Let's do a quick run-through of a few of the most popular financial vehicles out there and see how a Bank On Yourself policy compares using my 3 top benefits I have mentioned above...
1. Compared to the 401k...
The 401k is by far the most popular type of retirement account in the U.S. today. However most 401ks are heavily invested in stocks and mutual funds. I, personally, do not have a 401k, and in my view, this vehicle provides NONE of the 3 benefits above. Some may argue that a 401k has tax benefits, but for me, I would rather pay the tax now on the (smaller) "seed" - my current contributions from income - rather than the larger "harvest" - my ongoing withdrawals from my plan during retirement. Taking this view negates the potential "tax savings" provided by a traditional qualified retirement plan. (By the way, they're not actually savings. A 401k does not save you taxes, it defers them, which is a big difference.)
Benefits Missing: #1, #2, and #3.
2. Compared to a Roth IRA...
For those who want to invest money in the market in the hopes of higher long-term returns, a Roth IRA isn't a bad option. It does offer similar tax advantages to a Bank On Yourself plan in the fact that your retirement income withdrawals will be tax-free.
However, it does not work like a B.O.Y. plan in terms of liquidity, because even though technically you could access your money if needed for major expenses, you may end up having to sell in a down market in order to pull out money, which could cost you a lot in lost growth opportunities.
With a Bank On Yourself policy, on the other hand, not only can I access the money when I need it (without penalty), but I won't lose any growth in the plan if I do need to take some money out for a while.
Benefits Missing: #1 and #2
3. Compared to a Savings Account...
Lastly, you may be wondering, can't I just save money in a savings account and "borrow" it from myself when needed, and pay it back?
Of course you could. And this method would avoid risk of losses, and you would also have access to the money when you needed it. However, the growth rate - even in an interest-bearing account - is mere pennies compared to what a properly designed Bank On Yourself policy can provide over the long term, and you would still have to pay taxes on even those small gains.
Benefits Missing: #3 and 1/2 of #1
If you would like you can also check out this link to see how Bank On Yourself compares to some other financial vehicles besides the ones I have mentioned: https://www.bankonyourself.com/compare-your-plan
You can also find lots more information, articles, comparisons, more on the Bank On Yourself website here: https://www.bankonyourself.com/
The site also offers an opportunity to request a free analysis with a Certified Bank On Yourself advisor who can help you determine if this strategy would suit your particular needs and goals. If you do request a free analysis, I would appreciate it if you would note that you were referred by Rose Sarko. By doing so, you will be directed to some of the best and most experienced Bank On Yourself Advisors in the country, and I will contact you myself to schedule your appointment. :-)
In the meantime, I wish you health, happiness, and financial peace during this time of economic and other upheaval!
Rose.
Okay, with that out of the way, let's dive in!
Here are the 3 main reasons why I, personally, practice the Bank On Yourself strategy:
1. Its Growth Is Promise-Based Rather than Risk-Based.
I recently heard this phrase ("promise-based"), and realized that this is the main reason why I use Bank On Yourself. While most financial/retirement plans are invested in risk-based vehicles, Bank On Yourself belongs to a class of financial products that provides promises of long-term performance - unlike the stock market. (As you can imagine, I am especially happy about it in volatile times like these!) This is very important to me, as I don’t really want to have to be worried about what my portfolio is doing from day to day. I also really don’t like the thought of having no control over the performance of my money.
Since I am still quite a ways from retirement, I’m not necessarily looking for double-digit returns, and would rather have steady, predictable growth (with no losses) that I can count on over a long period of time, which is what my Bank On Yourself policies provide.
2. Bank On Yourself Offers Liquidity.
As someone who is still in my main working (and spending) years - and as a Christian - being able to finance my lifestyle without taking on a lot of consumer debt is very important to me. In the past 15 years, I have been able to finance more things than I can even remember or count using my policies! Just a few of them include: taxes and medical bills, our wedding and honeymoon, a down payment on our house, vacations, cars, and numerous large home improvement projects – most recently our new metal roof last year. All of these things were paid for using my policies.
We automatically make payments back to the policies every month, just like we would if financing all of these things from an outside source, except the interest rate is reasonably low and fixed, and every payment we make back into the policy increases our available funds for future purchases and/or future retirement needs, rather than seeing those dollars just disappear forever.
Having this kind of control and liquidity is priceless to me, and I'm not aware of any other financial tool that will allow me to do this - especially while also providing the other two benefits I have listed here.
3. Bank On Yourself Offers Substantial Tax Advantages.
Other than Social Security (and who knows what that will be like by the time I retire?), my Bank On Yourself policies will be my main source of retirement income. Although I don’t get a tax deduction for the money we put into my policies now, by properly managing and funding these over the years, I will be able to take tax-free income from my policies in retirement, which is more important to me in the long run, since I have no idea what taxes are going to be like in the future. Since we have been at historically low tax rates for several decades now, I’m guessing they will at some point go up.
Another interesting fact about Bank On Yourself policies is that if you pull money out as an income stream in retirement, it does not count in the provisional income calculation for Social Security, which means I will have less tax due on my Social Security benefit – just another neat way to lower taxes in retirement that many people aren’t aware of!
There are a number of other useful benefits to the Bank On Yourself strategy as well, such as creditor protection, the ability to pass down inter-generational wealth or be philanthropic, succession planning and access to capital for business owners, and more. The three benefits above are just my own personal top 3 reasons for using Bank On Yourself. However, in my experience working for a Bank On Yourself advisory practice for the past 14+ years, my list above comprises the three main reasons why so many other people also choose Bank On Yourself over other financial strategies.
Now, if you have looked into the Bank On Yourself concept in any detail yourself, you may have come up with the main objection which many people who don't understand these policies usually bring up: the fact that it's based on a life insurance product. I realize that many people have an odd bias against life insurance (mostly because they aren’t familiar with how it really works – and especially with the specific type of policies we use for the Bank On Yourself strategy).
In response to that, I would just like to ask you a question:
If you are looking for specific benefits and features that will help you achieve your personal financial goals, which is more important: that you arrive at your desired destination, or what vehicle you take to get there?
Only you can answer that question for yourself, and maybe you have a different view than me, but personally, I really don’t care what it’s called – I just like having the benefits I listed above! (In fact, if I knew of something else that would give me ALL three of those benefits, I’m sure I would consider doing that instead.)
If you simply can't get past this and you care more about the fact that it is life insurance than you do about having all of the benefits I have listed, then Bank On Yourself probably is not for you.
Maybe you are wondering if you could practice the Bank On Yourself strategy using a different financial vehicle? Let's do a quick run-through of a few of the most popular financial vehicles out there and see how a Bank On Yourself policy compares using my 3 top benefits I have mentioned above...
1. Compared to the 401k...
The 401k is by far the most popular type of retirement account in the U.S. today. However most 401ks are heavily invested in stocks and mutual funds. I, personally, do not have a 401k, and in my view, this vehicle provides NONE of the 3 benefits above. Some may argue that a 401k has tax benefits, but for me, I would rather pay the tax now on the (smaller) "seed" - my current contributions from income - rather than the larger "harvest" - my ongoing withdrawals from my plan during retirement. Taking this view negates the potential "tax savings" provided by a traditional qualified retirement plan. (By the way, they're not actually savings. A 401k does not save you taxes, it defers them, which is a big difference.)
Benefits Missing: #1, #2, and #3.
2. Compared to a Roth IRA...
For those who want to invest money in the market in the hopes of higher long-term returns, a Roth IRA isn't a bad option. It does offer similar tax advantages to a Bank On Yourself plan in the fact that your retirement income withdrawals will be tax-free.
However, it does not work like a B.O.Y. plan in terms of liquidity, because even though technically you could access your money if needed for major expenses, you may end up having to sell in a down market in order to pull out money, which could cost you a lot in lost growth opportunities.
With a Bank On Yourself policy, on the other hand, not only can I access the money when I need it (without penalty), but I won't lose any growth in the plan if I do need to take some money out for a while.
Benefits Missing: #1 and #2
3. Compared to a Savings Account...
Lastly, you may be wondering, can't I just save money in a savings account and "borrow" it from myself when needed, and pay it back?
Of course you could. And this method would avoid risk of losses, and you would also have access to the money when you needed it. However, the growth rate - even in an interest-bearing account - is mere pennies compared to what a properly designed Bank On Yourself policy can provide over the long term, and you would still have to pay taxes on even those small gains.
Benefits Missing: #3 and 1/2 of #1
If you would like you can also check out this link to see how Bank On Yourself compares to some other financial vehicles besides the ones I have mentioned: https://www.bankonyourself.com/compare-your-plan
You can also find lots more information, articles, comparisons, more on the Bank On Yourself website here: https://www.bankonyourself.com/
The site also offers an opportunity to request a free analysis with a Certified Bank On Yourself advisor who can help you determine if this strategy would suit your particular needs and goals. If you do request a free analysis, I would appreciate it if you would note that you were referred by Rose Sarko. By doing so, you will be directed to some of the best and most experienced Bank On Yourself Advisors in the country, and I will contact you myself to schedule your appointment. :-)
In the meantime, I wish you health, happiness, and financial peace during this time of economic and other upheaval!
Rose.
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