Why Rich Families Think Differently About Debt | Episode 166
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What is the main topic discussed in this episode?
Welcome to Private Banking Strategies Podcast with Vance Lowe and Seth Hicks, your secret weapon to protect your assets and never have to start over financially again. Vance and Seth help high net worth individuals, families, business owners, and investors structure an asset-protected, tax-free fortress for their families. Learn how to keep what you earn and use the velocity of money to create your own private banking system. Join us on this journey as we explore the secret strategies of the rich and political elite and help you take total control of your financial security. Now, onto the show.
Hello and welcome to Private Banking Strategies Podcast with Vance Lowe and Seth Hicks. Vance, how are you? I'm doing wonderful. I'm anxious
to jump back into where we left off.
I think we're going to pick up our conversation with the loan-based distribution strategy for retirement. Can you talk to us a little bit about
that? Okay. If you haven't heard anything up to this point, please listen to the first couple of videos because we're taking this retirement methodology one step at a time. And we're into the loan-based now, loan-based strategy of how things are going to work. for retirement or for future growth topics. So the core approach, I think, is the understanding that when we get money into these banking contracts with the life insurance carriers, the cash value becomes our accessible account that we can lend to our bank, our lending company, and by debt, loan out. What that means and the advantage of doing it this way, we're using after-tax dollars. When we borrow money out of this contract, we are allowed to put it back in.
Let's go through that definition. When we borrow from these contracts, we borrow against our cash value. We do not borrow our own cash value people please understand that because we do not borrow our cash value it remains in the account it earns a guaranteed interest rate, whatever your contract states. They can't change that. That will continue to earn and compound at least at that rate. In addition to that, you're an owner of the insurance company itself, and you participate in profits every single year on top of that. So the advantage is when we need to borrow money, it's because we're going to self-finance something. And we're taking money out. We're going to borrow the cash reserve of the life insurance company against our cash value.
So how much can we borrow? Equal to what we have in our cash value account because they want to have it 100% collateralized. They're not like banks. They can't lend money that they don't have. So they, dollar for dollar, we can borrow cash reserves. We can borrow it at a very competitive rate. This is money that life insurance companies lend out for communities in towns and communities and get a very stable return. This is what they do, kind of like banks, but only on a more secure basis. So we're already making 3% on that money. We're going to minus anything above that that the insurance carrier is going to charge us. But now we put the money to work. So I'm going into a little more detail here, folks, so that we can understand when we put this money to work.
Maybe it's to finance a car, but it would be better or more likely that we're going to take over. We're going to purchase an existing car loan. So let's say one of our kids bought a Honda costing $30,000, and he's into that contract two and a half years. So he's got two and a half years left on a five-year contract. If we purchase that loan, we have to come up with, let's say, $15,000. It might be a little more, whatever, depending on what he's actually paying or how he's doing it.
What is the loan‑based distribution strategy and why do wealthy families use it for retirement?
But we have to come up with $15,000. But what we're going to get in return is the ownership of that loan. So your son is not going to change at all. except who's paying the payment or where he's paying the payment is what's going to change. Instead of paying it to Honda Finance, he's going to pay it to the family bank. And let's say that payment is $600. And that interest with Honda Finance, Honda does a lot of financing at 3% or just a little bit below 3%.
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Chapters
5 chapters
1
What is the main topic discussed in this episode?
0:01–4:11
2
What is the loan‑based distribution strategy and why do wealthy families use it for retirement?
4:11–6:19
3
How does borrowing against the cash value of a life‑insurance contract work?
6:19–13:31
4
What are the rules for how much you can borrow and at what interest rate?
13:31–18:46
5
How can you purchase an existing family loan (e.g., a child’s car loan) and earn a higher return?
18:46–23:47
Speakers
2 identifiedMore from Private Banking Strategies
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