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Learning, Sharing, and Teaching => Investor Alley => Topic started by: hoping2retire35 on March 05, 2018, 11:39:42 AM

Title: 501K PLAN
Post by: hoping2retire35 on March 05, 2018, 11:39:42 AM
Someone got me this book and I have only read the first chapter or so. Seemed like some weird gimmick. I don't know enough about insurance but my basic understanding of it is

1. Set up a Permanant life insurance policy with a participating clause

2. 'Invest' as much money as you can by way of premiums.

3. Borrow money from this policy as often as you need to, tax free. You are limited by how much you have in premiums and in gains, however it is all tax free.

I may have missed some of the details ore even messed some up a bit but that is the gist of what I have read so far.

Can anyone verify if this is legitimate? Even worth reading the book?
Title: Re: 501K PLAN
Post by: dandarc on March 05, 2018, 11:42:29 AM
this has gone by many names over the years.  "Bank on Yourself" comes to mind.

The point is for the person selling this to sell you a shit-ton of life insurance and collect the commissions for doing so.  Any benefit to you is minor and beside the point.
Title: Re: 501K PLAN
Post by: Scortius on March 05, 2018, 12:51:36 PM
You get to borrow your own money tax-free? Wow, sounds like a great opportunity!
Title: Re: 501K PLAN
Post by: Alex239 on March 05, 2018, 01:35:51 PM
Can confirm as I sold insurance for awhile, mostly property/casualty (car/home ins) but I learned about the big comission whole life stuff even though I only managed to sell term life. It is deifnitely a way to sell you a huge policy with fat commissions for the agent with little real value to you, unless you are trying to do things tax free with millions as a business owner. Most instances don't lend great benefit to the policy holder as high net worth individuals reap the best rewards. from wikipedia "Whole life insurance belongs to the cash value category of life insurance, which also includes universal life, variable life, and endowment policies." https://en.wikipedia.org/wiki/Whole_life_insurance
Title: Re: 501K PLAN
Post by: jacoavluha on July 20, 2018, 08:09:37 PM
No.
Title: Re: 501K PLAN
Post by: MDM on July 20, 2018, 08:29:47 PM
Can anyone verify if this is legitimate? Even worth reading the book?
A "weird gimmick"?  Perhaps no better sign of click-bait.

Even for high income earners (e.g., doctors) there are at least 5 Reasons Not To Buy Indexed Universal Life Insurance (https://www.mdmag.com/physicians-money-digest/personal-finance/dahle-5-reasons-not-to-buy-iul-insurance).  And beware of new posters claiming otherwise. ;)

Title: Re: 501K PLAN
Post by: Another Reader on July 20, 2018, 10:28:29 PM
Just joined the site and saw your post. The problem with using insurance policies in this fashion is that most advisers do not know how to structure policies right. Sometimes this is due to shear ignorance and other times it is just because they are greedy and want to receive larger commissions. However, when structured right, I have not seen anything that can beat the performance of an IUL. And I can show you this with back tested data.

Another insurance salesman...
Title: Re: 501K PLAN
Post by: reeshau on July 21, 2018, 02:19:45 PM
You get to borrow your own money tax-free? Wow, sounds like a great opportunity!

+1

Tell you what.  You give me all your money, and I will let you borrow some back, too.  Also tax free!  And I won't even make you sign a bunch of forms.