Banking from Yourself & Leveraging/Hedging Stocks

“Whenever you find yourself on the side of the majority, it is time to pause and reflect” -Mark Twain

In 2016, I learned this little known financial hack utilized by the smart money.

By being your own bank and using the Infinite Banking Concept you can create a dividend-paying whole life insurance. Its called life insurance but its just a tax code loophole to make a tax free yield in an account that is sheltered from lawsuits and creditors.

Add this to the list of things your typical financial advisor or life insurance sales guys just does not get… likely because they are still working for a paycheck and it actually decreases their commissions.

“Infinite banking” is just one term for this. The magic of the infinite banking concept is to create tax free “wash loans”. Where the dividend rate on the cash value is equal or greater than the interest rate on the loan and maximizing the use of Paid Up Additions, which have a lower commission rate than the regular policy – this is why most FPs don’t like this.

And for you high-net-worth folks still dabbling in paper assets, you won’t want to miss this other trick that I will reveal on there too – Email me for this info.

This is a part of my 1-2 punch to avoiding liquidity anxiety and having an Opportunity Fund to go after deals as they come up. I call this my “on-deck circle” cause I don’t like how the term… “dry-powder” sounds. More info. (Also has the latest info on the latest 2018 AHP fund in the first half of the webinar)

I think starting a small policy with 25% of your household’s annual cashflow is a good idea to start today… even if for the asset protection the policy provides (even in bankruptcy).About half the states protect the whole life insurance policies payable to spouse or children with partial protection in all states. Plus these assets do not appear on your kids FAFSA. So if you are like me and want to load your kids up with student debt (to get a BA in pottery or psychology) and ensure your golden retirement for numrouno (you) this is a good strategy.

For a warm intro to the guys I recommend email me at [email protected]
This is a part of my 1-2 punch to avoiding liquidity anxiety and having an Opportunity Fund to go after deals as they come up. More info.

Wealth Formula Banking w/ Lane Kawaoka Outline

Downloadable excel example

  1. Purpose statement: Wealth Formula Banking is how cash flow investors enhance the investing they already are or will be doing
  2. Vehicle:
    1. Net 5–6% Return
    2. Tax-Free
    3. Safe / Predictable
    4. Liquid
    5. Loan Provision
    6. Death Benefit / LTC
  3. Strategy:
    1. Same dollar creates value in 2 ways
      1. Simple vs. compound
    2. Replace the bank
      1. Opportunity fund
      2. Safety
  • Liquidity
  1. Higher return
  1. Real life example: WFB vs. Bank


Next up is this method of hedging yourself to a 0% loss. So if the stock market goes down 10-20% in one year you lost 0% 😁

Unfortunately, by taking this type of deal (that the rich do) you cap your upside at 12%. So if the market goes up 14% you only get 12%.

Here is where the strategy comes together… We leverage your investment by using 3X leverage. So if the market goes up 7% you get 21%. In that case, where the market goes up 14% you only get 12% you actually get 36%.

I know it sounds crazy. It’s like bowling with the bumper rails in place.


Growth—Expect to net a 5-6% return. This comes from a gross interest credit of 4% guaranteed, along with a long history of paying dividends that are currently paying an additional 2-3%.

Loan Provision— Policies carry a unique guaranteed loan provision that makes it possible to use core wealth building principles such as leverage, velocity, and cash flow to maximize the way your money works for you. Because money on a loan comes from the general account of the insurance company, NOT directly from the cash value, we can create value in more than one place at the same time.

Safety—100% safe from market volatility and guaranteed to grow. These Mutual Life insurance companies we represent have been paying dividends for more than 150 years. This includes times like the Great Depression, World Wars, and a myriad of different market cycles.

Liquidity—Unlike having money in a qualified plan such as an IRA or 401K, money is accessible at any time without the worry of a 10% IRS tax penalty. Liquidity can be the difference between capturing an opportunity or letting it slip away.

Tax-Free Growth— Money grows and comes out on a tax-free basis, and unlike a Roth IRA, there are no contribution or income limits.

Death Benefit—Since we are using a dividend-paying whole life insurance, there’s always a 100% tax-free death benefit. Although we’re primarily focused on the living benefits and cash growth, this is a significant benefit. It’s insurance we don’t have to pay for in any other way.

Long-term Care Coverage— Provides for an efficient way to plan for the ever-increasing expenses associated with long-term care. By utilizing the accelerated death benefit rider (no additional cost), you can utilize a portion of the tax-free death benefit to cover long-term care costs.


Velocity Plus w/ Lane Kawaoka Webinar Outline (More to come…)

  1. Purpose
    1. Leverage
    2. Max income w/ least dollars
    3. Alternative for retirement plans
    4. Great for groups
  2. Concept Structure
    1. Leverage
      1. $100k for 1 property?
      2. No. $100k for 4 properties
  • Do the work of $400k
  1. Years 1-5: Policyholder and bank contribute
  2. Years 6-10: bank only
  3. Ratio: 25% policyholder, 75% bank
  4. No collateral needed beyond policy
  1. Product: Indexed Universal Life
    1. Use an index
      1. Cap
      2. Floor
    2. Capture 80% of upside
    3. No downside
    4. Policy structure: max cash growth/min costs
  2. A Look at the Numbers
    1. 46-yr-old
    2. $1M total going in
      1. $50k from policyholder / $50k from bank
      2. Then bank takes over total
    3. @ year 15—pay off bank loan
    4. Age 65-90—tax-free income of $115k/yr
    5. $250k goes in, total of $3M comes out!
  3. How it Works—Leverage Throughout
    1. Spread—growth vs. loan interest
    2. Leverage the bank for 15 years
    3. Pay off bank loan using policy loan
  4. Leverage Throughout—A Snapshot
    1. Example numbers at year 15 after we pay off bank loan
    2. Figures:
      1. Total Cash Value: $1.8M
      2. Loan Balance: $1.2M
  • Net Cash Value: $600k
  1. Let’s say we get a 10% credit the next year:
    1. $180k (calculated from Total Cash Value)
    2. Loan grows by 5%–$60k
  • Growth in Net Cash Value–$120k
  1. That’s a 20% gain on our net equity
  1. Overall return is 18%!
  2. Estate planning
  1. 2 Primary Risks
    1. High Interest Rates
    2. Poor Performance
    3. “Stress Testing”
      1. 80’s interest rates–$98k/yr income
      2. Great Depression–$78k/yr income
    4. Baseline income was $115k/yr

Past resources:

We are not talking about your father’s whole life insurance

Whole life insurance is only one part of the above strategy. below is a discussion on my thoughts on the product as it stands alone.

First off, its a product which you pay for. The providers (insurance companies) are using the best minds and big data to price out your coverage premiums which include marketing, sales commission to your FP, and a wee bit of profit for their company.

In most cases, if you die while owning life insurance, you get paid the death benefit, tax-free because of the step-up in basis at death

Term life insurance gets really expensive after the term ends and as you get older (cause its price by the chance of you dying).

Whole life insurance is designed to pay out when you die so you can see how its sort of like a bank account. The way we are using this policy is taking loans against it.

Note – A Guaranteed Universal Life policy if a flat death benefit where the Whole Life grows.

These policies allow you to accrue interest on the amount of cash value that is not being “borrowed out” of (technically borrowed against) the policy. People in the industry call this “direct recognition.” Just be aware that “non-direct recognition” pay dividends as though no money was borrowed against the policy. Just something to ask when setting up your policy.

Downsides of the Whole Life product

You are front-loading your costs and fees. This can be devastating for someone in the early stages of wealth building. (Almost as bad idea as paying off low-interest student debt or mortgages before investing)

I like the ability to use this vehicle as a means to bank from yourself but keep in mind that you should not need insurance you don’t need.

I think you should ensure well against true financial catastrophes and self-insure against everything else. Yet I ensure my iPhone because I am weird like that… actually, I justify it that I would search the world wasting my time for two weeks before going buying a new device. So insurance for a phone would save me time since I would not hesitate to give up looking and put in a claim.

Returns are typically low (when compared what we do in real estate investing). So just getting a policy alone and not implementing the “wash loans” does not make sense.

Most times the commisions are maximized by the FP. This can get complicated on how to design this stuff so its an ideal situation for a greedy FP to pull one on you. By maximizing the use of “paid up additions” while minimizing the amount of “regular policy” you can decrease the commissions and still execute this strategy.

Other pitfalls:

80%+ of whole life policies are surrendered prior to death because their beneficiaries need to money beforehand. Perhaps on an ALF (even though some policies have this benefit).

It’s slightly more expensive for older people and smokers to get ensured however I have found it to be negligible (1-3K difference on a 50k premium) between a 30-year-old non-smoker and a 50-year-old non-smoker.

Smaller policies like for your kids have much more fees because the setup fees fit into the policy. So buying a $20K policy for junior who does not smoke might not be the best idea.

Users Manual

Assuming you got yourself set up with one of these sweet arrangements (if you need a warn referral let me know) the following is some nuances I found by using my own policy. This is a part of my 1-2 punch to avoiding liquidity anxiety and having an Opportunity Fund to go after deals as they come up. More info.

Withdrawing money via Loan

You can take money out of your Cash Value portion. When I contributed to my policy I got 70% of what I put in as Cash Value on day one to be able to take out as a loan. This I could use for deals or whatever I wanted. This is super simple as you can go online or call into your provider and tell them “you want to take a loan from you Cash Value”. Simple they send you a check or ACH transfer and usually takes about a week.

Replenishing money to payback you Loan

I am actually writing this to myself as it’s a little tricky and this way I remember the steps.

I print out a simple letter (examples below) and mail with my check to my friends at Ameritas.

Example 1:


Dear Ameritas,

My name is Lane Kawaoka (######).

I have enclosed a payment for $60,000.

Due to my flex rider please apply my payment in the following order:

  1. $64,510.01 to the Loan balance (pay off loan then…)
  2. $15,074.91 to the Annual Premium
  3. Any excess to be paid to overfund my account

In addition, please switch my premium billing to an annual basis and remove my automatic billing per month.

Please advise when the next bill will take place via email.


Example 2:


Dear Ameritas,

My name is Lane Kawaoka (######).

I have enclosed a payment for $65,000.

Due to my flex rider please apply my payment in the following order:

  1. $64,510.01 to the expire Loan balance (pay off loan then…)
  2. Any excess to be paid to the $15,074.91 to the Annual Premium

Please advise when the next bill will take place via email.

Flex paid off rider

In whole life policies, you have this add-on where you are allowed to add paid up additions (purchasing larger death payout and cash value). In my policy, I need to put in at least 70% of $35,000 once every three years. Note – there are other types of these riders where the requirement is to put a more consistent amount every year but personally prefer the 1 out of three-year arrangement because my business income fluctuates so much.

Without penalty, I can go over 120% or $42,000 every year as my max. If I want to put in more I would have to make a new policy and get another physical. This limits the risk for the insurance company if you are putting away infinite amounts of cash after deciding to pick up the hobby of skydiving while smoking 2 packs of cancer sticks a day.


Play with the numbers yourself

Are you convinced let me know if you need a referral.


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