08 Mar 2016

Part 2 in Our Series on “Buy Term and Invest the Difference” (Why It’s Misleading)

Lara-Murphy Show 8 Comments

Here you go. (The link has been fixed.)

8 Responses to “Part 2 in Our Series on “Buy Term and Invest the Difference” (Why It’s Misleading)”

  1. Patrick Szar says:

    Forgive me if the answer is in your book, I haven’t received my copy yet, but how will N.I.R.P. affect the whole life policy? How about a collapse of the dollar?

    • Keshav Srinivasan says:

      Here’s what Bob said in an old thread:


      “If you were pretty confident that the dollar would crash within the next year, then that would mute a lot of the benefits of setting up a whole life policy right now (as opposed to waiting for the crash and the dust to settle).

      But, I’m personally not so confident about the timing anymore, even though it wouldn’t surprise me at all if the dollar crashed next week. So that’s why I am funding my existing policy to the max. I have lots of bills to pay that are denominated in dollars etc., and for all I know we’ll be in this limbo for a while. Currency speculators obviously aren’t seeing the world the way I am.”

  2. Keshav Srinivasan says:

    Bob, I have few more questions about the Infinite Banking Concept:

    1. How easy/fast is it to get physical cash using a policy loan? Do you need to get money transferred to a bank account and then withdraw it via ATM?

    2. How would writing checks or using a debit card work if you’re doing the infinite banking concept? Would you need to transfer a certain amount of money to a bank account if you want to do things like that, or is there such a thing as a “policy loan debit card” or something that instantaneously obtains funds via a policy loan whenever you make a purchase?

    3. Why is it that you can only do the IBC via an insurance agent who gets a high commission, whereas you can easily buy a term policy online without anyone collecting a commission? I dare say that’s a big reason a lot of people are wary of the IBC: they think it’s just a way for insurance agents to make more money. If commissions are necessary because it takes a lot of training to craft an IBC whole life policy correctly, why doesn’t the IBI just produce a standard contract that any two-bit untrained insurance agent can use, that way consumers have greater confidence that it’s not just a money-making scheme?

  3. ax123man says:

    Bob, the behavior of your landing page on an iPhone 5 in landscape is a bit weird. The main photo fills the screen, but tapping on the photo is what triggers the mobile menu that pops out on the left. You can’t scroll down like you can in portrait. Well, you kind of can: if you go into landscape, tap to pop out the menu, scroll the menu down and touches below the original height of the page start scrolling the content underneath. Kinda hard to explain.

  4. Tel says:

    First to say I do enjoy these Lara/Murphy Shows.

    Just a few points to nitpick a bit.

    Carlos says that people want “inflation protection” and he also says that back in the 70’s and 80’s when inflationary forces were cranking up the price of everything suddenly Whole Life policies stopped being popular. Now sure you can write a contract for anything but the gist of the Whole Life is that your return on investment is pretty much locked in from day 1 over a long period of time (like 60 to 80 years). I can see why inherently that’s going to be very difficult when you get a decade of high inflation jammed in there.

    I also understand that you can borrow your money back ouy again and use that to invest if some really good opportunity comes along. That might offer some inflation protection for people who are quick on their feet.

    Personally I think we can expect all that QE money to wash out at some stage into prices. Probably not immediately going to happen but I really, really find it hard to believe the Fed can unwind their position. They seem to have enough difficulty just taking baby steps towards normalizing interest rates. This is one reason why I would be reluctant to sign such a long term contract at fixed return.

    Another issue, there is some logic to NOT covering your whole life with insurance. If you think about it, when you are young, you have a lot og earning potential, but no dependents. When you are old you don’t have a lot of earning potential left in you anyhow and your kids probably have jobs of their own. That means the time life insurance is most valuable would be the middle aged stage of life (approximately) and if you just want to cover that specific period then a term policy is the way to go.

  5. Bob Murphy says:

    Thanks for the comments everybody, but I’m in Eastern Europe all week. Axman I’ll pass along your note to our web guy.

  6. Adrian Gabriel says:

    I find it interesting that Mr Lara suggests if one decides to get a Term Life Insurance plan then invest the difference in maxing out your IRA or 401K. Very interesting. Indeed one would have to have a very well chosen array of stocks or investment instruments to have this scenario be worth while.

    I would think getting a Whole Life Insurance plan is the best bet for BEING YOUR OWN BANKER more than anything else. It seems to me people misunderstand the purpose of Dr Murphy’s premise in his book. Murphy and Lara are suggesting using this as a form of a demand deposit that pays interest, or in the case of Whole Life Insurance, a fixed rate of return over it’s life. Sounds good to me, much better than your typical demand deposit at a bank any day.

    I also found in reading the book, and I do not consider myself an expert so please refer questions to Dr Murphy, that in using Whole Life Insurance one is not subject to only this single investment. One could also do as Dr Murphy suggested he does, meaning that he suggested he also had various Term policies.

    Being an Austrian, it would be in one’s best interest to remove one’s self from the time deposits and demand deposits of your typical banking institutions, and when one sees the purpose for doing so, they’d certainly not reconsider Whole LIfe as it would be one’s first choice hands down. Furthermore, after one sets up a Whole Life Insurance Plan, one could definitely get a Gold IRA or invest in Gold ETFs and the like. Getting a Whole Life Insurance plan does not limit the scope of further possibilities into having one’s money in other investment vehicles. It just seems very logical to me that the Infinite Banking Concept is indeed the most logical way to remove one’s self from modern FRB at commercial banks.

  7. Guest says:

    Pay off your debt, then invest.

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