Unbridled Wealth | By Jason Powers
The miracle of compound interest refers to a lot in the realm of investments. The problem is that investments do not compound interest. They either appreciate or depreciate. Yes, some pay dividends or interest and we’re often encouraged to reinvest those, but that isn’t the same as compounding interest.
Compound interest is when you take a dollar and put an interest rate on it. For example, $10,000 growing at 5% becomes $10,500 in a year and then $11,025 by the end of year 2.
When saving for the next real estate deal, we want our dollars to work for us. But, if we’re speculating in the market with those dollars, we can take an unexpected 20% hit over the course of a year on those savings.
If we’re saving in a bank account, we’re earning next to nothing on those dollars.
Enter the rarely talked about savings vehicle that does compound your dollars year after year.
When you properly design a permanent life insurance policy, your premiums build increasingly more cash value year over year.
Your cash value grows at a contractually guaranteed rate plus a dividend year after year. No down years – ever.
You quickly arrive at the place where you’re saving $10,000 into the policy and getting access to $11,000 for a real estate investment.
And the beauty of this account is that it can be leveraged. Rather than withdrawing $11,000 and interrupting the compound growth happening on our savings, we can borrow against it so that the life insurance carrier’s dollars are at work for us in a real estate investment and the full amount of our dollars are still compounding for us in the policy.
There is a tremendous cost when you consistently save up and then withdraw your dollars to fund an investment. Don’t get me wrong, it’s a big win to secure a real estate investment.
But when you just give your dollar one job, growing in the stock market or a bank account, and then being withdrawn to fund your deal, you are losing out on those dollars’ ability to grow for the rest of your life.
Creating a pool of capital that grows guaranteed for life and is always accessible (tax-free) to fund investments when they come along, will recover an innumerable amount of opportunity cost throughout your life.
This strategy is called the Infinite Banking Concept (IBC).
Reach out to Jack, Olivia, or Jason – your Unbridled Wealth business associates at AZREIA, to learn how you can implement this strategy into your financial plan.