Resiliency

Odd that I waited all of forever, until this moment, to post a blog. Why?

If you’re reading this, I may have reached out to you recently, which may have seemed to be coming out of nowhere.

Why I’m reaching out to old friends and acquaintances:

(1) To reconnect, catch up, and make up for lost time:
Yes, I seem to be coming out of nowhere. Truly. I have not been active on social media (especially Facebook) for many years now, and the only thing I regret about that is that I missed out on your lives, if for no other reason than to be present with you and share in your ups and downs, your birthdays, weddings, triumphs, hardships and everything in between. Everybody knows by now that for Facebook, Google, LinkedIn and most of the rest of them, we’re the product. The calculation I made was that to gain this modicum of privacy and extra time was worth disengaging from my friends, family and acquaintances online. I could have tried to corral everyone I know onto a different platform. For example, MEWE seems to be a good privacy-first alternative where members have total control over their media (with Tim Berners-Lee on their advisory board). I try to use Signal, Element and Protonmail as default privacy-focused platforms for texts and emails. But most people aren't there, and may never be. So, generally, the calculation I made with respect to social media just has less upside than downside.

(2) To offer an opportunity:
I've joined two companies whose missions are "To provide real financial education and innovative solutions to help clients achieve financial prosperity and peace of mind" and to empower "consumers to achieve their financial goals through an educational approach to investment opportunities and risks, and the maximization of accumulation and protection strategies." I now have my life and health insurance license and I'm working toward my Series licenses. Actually not that hard to do. The opportunity and the mission is greater and more important than ever in this incredible time of market volatility and unsustainable valuations, technology-driven unemployement, uncertainty, and tens of millions of people retiring. Millions of people need to rollover their 401(k), set up Roth IRAs and annuities, protect their assets, and rebalance their portfolios. Millions of people are looking for career changes. Maybe you could be one of them?

(3) To be of service:
Of course, to be an insurance agent is to be of service in a crucial way. Insurance protects against loss, ensures your mortgage and debts are paid so your loved ones aren't burdened with reconciling those debts upon your passing, provides income replacement plans for people who become disabled, and provides a vehicle to store value in a tax-free way to use in your lifetime to finance business ventures, homes and college expenses.

Side note: my father sold insurance for 23 years for Allstate, and in all of that time I never learned about "infinite banking" (or variously called "family banking", "banking on yourself", etc). So I imagine most people aren't aware of this concept. Or maybe you've heard about it and run screaming because it's cringey. Here it is in a few steps, updated to reflect newer product types:

1. Buy a permanent cash accumulating life insurance policy with a death benefit.

• Add living benefit riders for safety and extra utility if you want to.
• Choose the appropriate index allocation (I prefer a 1 or 2-year S&P). 

2. Front-load it as much as you can (without triggering the Modified Endowment Contract IRS rule).

• Though I'd recommend you spread it out over 12 months because of the way the cash balance is credited. I'll post another blog about this soon, with a spreadsheet to prove my math.

3. After 30 days, you can take out an "alternative loan" on the cash that has been allocated after the "sweep date"

• The cash stays allocated and you'll be paying 5% interest annually on the borrowed amount, on the policy anniversary date, to borrow this money which is illustrated to outperform the cost to borrow the money.
• If you don't pay the interest, it will capitalize.
• The value of the cash value balance will continue to grow on average over time, at a rate exceeding inflation.
• The amount you're paying in interest on the policy loan rate is usually repaid and then some, since on average over time the cash value appreciates faster than the interest rate accrues, so it will end up being better than you can get from a bank (nice little arbitrage). When you pay the loan back, you pay yourself back.

4. Invest. The "infinite banking" part refers to how you can use that loaned money the way a bank does, to generate more money than what it costs to borrow it, by funding business ventures or other high-return investments - also known as arbitrage, or leverage.

• But of course, you could use that loan to for anything fund a college education, car, house, or a business venture or other investment. Pretty simple.

5. The most important part is paying your loan to yourself back, because you don't want to rob your own bank.

Ok, so you might be wondering...
(1) Why not just save?

• Well, because of the opportunity cost. Your money is still working and gaining interest while you're also using it for other purposes.

(2) Why not just invest your money in the stock market or anything else that generates a higher return instead of putting it in this vehicle first?

• Volatility. If the stock market falls 50%, to get back to where it was it needs to appreciate 100%. That costs you the time it takes to recoup your principal (plus interest because inflation erodes your dollar.
  • You'd also be subject to capital gains if you hold that investment in a cash brokerage. ​And if you held it in a qualified account, there are some restrictions about when and how, and how much of it you can use. Just depends on your goals.
• Tax Consequences. Insurance is a tax-free vehicle as long as you pay your own loan back eventually, or you don't withdraw more money than the principle that you put in. (Though withdrawal is categorically different than taking a loan).
  • One word of caution: don't allow your policy to lapse while you have outstanding loans because if there is any gain on that cash you will be liable for capital gains tax.
• Opportunity Cost. This is the only way that I'm aware of to borrow against your own invested assets without paying a third party back both principal and interest at higher interest rate. 
  • ​For instance, you can borrow from your 401(k) and pay yourself back at reasonable interest, but your custodian will not allow you to borrow against invested cash. First you need to divest from investments to make that cash available.
  • Or you could borrow against your home equity with a HELOC, but (1) not everyone has a house, and (2) now that equity is tied up, and (3) this may affect your credit, and (4) it will restrict how much you can borrow from other lenders because your debt-to-income ratio is now less favorable.
• ​It's a private loan that doesn't show up on a credit report. Loans to yourself from your insurance policy [or your Solo 401(k)] don't show up on credit reports so you can have access to that extra credit if you need it.

No, I'm not making this up. Here are some books on the subject:
Money, Wealth and Life Insurance
Becoming Your Own Banker

But my financial practice doesn't just sell insurance.

• We also sell contractually secured asset-backed products with fixed double digit returns that you can own in cash accounts or any kind of retirement or qualified account (IRA, 401(k), HSA) whose custodian allows it.
  • Incidentally, a lot of custodians don't actually allow you to invest in any kind of investment that the IRS Code permits, but we can help you with that too, to open and fund the most capable qualified accounts out there whose fees are competitive with anything on the market.
• We provide free advice to help people manage their finances, debts, and plan for their futures and retirements in tax-advantaged ways.
• We help structure estate plans with wills, revocable living trusts, advanced directives, financial and medical powers of attorney, letters of intent to return, and HIPAA letters.
  • All of this protects people when they are the most vulnerable and asserts their power legally when they can no longer voice it. What's more, the revocable living trust is an absolutely essential component to protect your assets from legal action and taxes, to maintain your eligibility for certain kinds of government financial or medical assistance when you most need it, and to pass on your legacy the way you intend.
  • By the way, you can also direct to the executor that upon your passing, the living trust becomes an irrevocable trust, an endowment for your legacy gift for your heirs or to give grants to organizations that share your values.

This will be the first of many blogs I post. I'll reveal more about my personal story as time goes on. You can also check out my services and the businesses I've started, and my bio if it's been a while since we connected. If you're a friend and you're not on my friends page, reach out - every inbound link helps with search discovery.

In the meanwhile I want you all to know that I'm safe, I'm well, and I'm continuing to learn and grow. I wish the same for all of you. Thanks for reading!

Reach out to me on LinkedIn or on my contact page.
Be well,
Ryan