Infinite banking is a concept proposed by Nelson Nash, who wrote the book ‘Becoming Your Own Banker: Unlock the Infinite Banking Concept’ in 2000. The idea is that individuals can save money and create wealth for themselves by using a whole life insurance policy to achieve financial independence. This involves taking out a permanent life insurance policy, such as universal or variable life insurance, and then using it to accumulate cash value over time which can then be accessed through policy loans. 

The key benefit of this strategy is that you can use the accumulated cash value as collateral when accessing funds while still receiving the death benefit in case of your passing. By leveraging this concept, you are able to essentially become your own banker – just like everything entails Pros and Cons, so does Infinite Banking. 

Let’s take a look at the few important key points of Pros & Cons of Infinite Banking: 

Pros of Infinite Banking:

1. Access to cash whenever needed, with no need to wait for banks or financial institutions to approve.

2. The ability to invest without being subject to market fluctuations and the potential for higher returns than traditional banking investment methods.

3. Potential tax benefits due to the use of dividend-paying life insurance policies that are not taxed until withdrawn.

4. Safety and security in knowing that your money is held within an insurance policy rather than a bank account, providing peace of mind should something happen outside of your control (such as a stock market crash).

5. Flexibility in how much you can borrow from yourself and when, depending on what your current needs are.

6. An increased sense of control over your finances that comes with the ability to make decisions and have access to funds without having to consult with a bank.

Cons of Infinite Banking:

1. High fees associated with certain policies and riders, which can add up quickly if not managed properly.

2. Potential lack of liquidity due to the fact that life insurance policies are not as liquid as stocks or mutual funds, which can make it difficult to withdraw cash when needed in case of an emergency.

3. Possible difficulty navigating the system if you’re unfamiliar with how life insurance works or how investments work within this system.

4. Limited investment options compared to traditional banking methods, meaning you may not be able to diversify your investments as much as you would like.

5. Potential for higher risk investing due to the limited investment options offered in this system.

6. Difficulty planning for retirement if you’re not sure how long the policy will last and what return rate you can expect on your investments over time.

Understanding the pros and cons of infinite banking is essential for anyone considering this type of financial strategy, so that they can make an informed decision and plan accordingly. With the right knowledge and preparation, it can be a great way to access funds when needed and potentially enjoy tax benefits as well.

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