I haven’t seen an argument yet that I can’t lick.

My favorite argument right now is Dave Ramsey’s “They keep your money when you die” argument.

Oh really?

Numbers don’t lie and here are mine…

One day one of policy, I could have dropped dead and my wife would have received $400,000.

One year and $12,000 in premiums later, if I had died, my wife would have received $450,000.

(Could I interest you in some 2nd grade math?)

After 2 years and $24,000 in premiums, my wife could’ve bumped me off to receive half a million dollars!

Dave, half a million is MORE than $400,000 + $24,000.

And if I die today, my wife will get the original $400,000 death benefit + our $50,000 we paid in premiums + another $100,000 in “take that, Dave!” money.

BOY works well when implemented as described.

And I happen to like (and got lucky) with Lafayette Life because it turns out they have almost the highest ratings you can get from Fitch and AMBest. And ratings matter when you’re talking about life insurance.

To me, I see BOY as my fixed income (money market) portfolio in my investments, but much more flexible than what I currently have in my 401K.

BOY is setup with a base whole-life insurance policy with a short term life insurance portion. The term portion is what allows you to do the PUAs. What I did was setup so that I can pay the minimum portion of it annually. That is the base policy plus term. If I can’t pay that as one lump sum then it is too expensive for me and I should get a smaller amount of coverage. The rest I will pay in PUAs. If one year I have extra money then I pay more PUAs and if I have less I pay less.

The main idea is to not let your base policy lapse.

My agent is using Lafayette Life b/c they allow a very flexible PUA. Most companies do not and you must pay the amount you signed up for. That may be why Lafayette is more expensive.

If the response shows up, ignore this.

So, is this BOY a good deal. Are you going to purchase it.

Good point. My time savings is earning a great rate of 0.60%! :p

It seems like you signed up on faith and it’s working for you. Anyone who truly understood how this “recapture” works would’ve been able to post the numbers I did above.

I sure hope the numbers I posted will help those who are slow like me to finally understand BOY. It took me nearly 4 months to see this. I should’ve tried the spreadsheet numbers earlier to save me the trouble.

To clarify one thing, the recapture is initially only the interest. But when you get that interest eventually it’ll continue to grow and gain more interest. Eventually you’ll really recapture the purchase price. I ran the $10K numbers and it will take around 3 purchases and 12 years to recapture the purchase price of the first purchase. Essentially you’re getting 3 items for the price of 2.

Where are we supposed to get the 5% interest rate in a savings or money market account that you used above in your “non-BOY” calculation?!? I’m not even getting 1% these days!

I’m glad you “finally see” how the recapture aspect of Bank On Yourself works. As I mentioned earlier, I’m not a “spreadsheet” guy, but since we’ve used our Bank On Yourself policies to finance cars, vacations and some home repairs already, I got all the proof I needed that I’m recapturing my money when I finished paying my loans back to the policies, and the full cost of those purchases was back in our policies – and then some. So I was able to use those dollars over again.

If I had used bank financing or put those purchases on a credit card, what would I have to show for my payments after I finished repaying the loans?

Nothing (other than the trade value of the cars).

I realize not everyone sees it this way, but I don’t see how pulling numbers out of a hat to run projections helps much.

One mistake I’ve seen some people make to compare using a BOY policy to purchase something with not making the purchase at all. Obviously, that’s not a fair comparison.

Let’s assume BOY earns 5% too – interest and dividends. You have the same loan at 6% and 4 years.

Year____StartBal____Interest____EndBal
0_______________________________10000
1_______10000_______500_________10500
2_______10500_______525_________11025
3_______11025_______551.25______11576.25
4_______11576.25____578.8125____12155.06

After you pay your policy loan your CV grew to $12,155.06, which now you can access again. So see, you did recapture your loan cost PLUS MORE.

You may also notice that the non-BOY ended up at $12,480.86 though. The only reason I can think why the BOY numbers above are worst is b/c the dividends will be used to buy more insurance and you will get slightly higher dividends each year. Over 4 years I’m not sure how much that will be. Maybe it’ll give you the same results as the non-BOY.

I ran a similar schedule using $200K over 20 years and non-BOY beats BOY by like $50K. that’s not good.

You have some account (doesn’t have to be BOY) that has $10K. Playing as a banker you loaned yourself that $10K, but you pay yourself back w/ interest let’s say it’s 6% for 4 years. Your account is also earning you 5% interest. See schedule below:
Monthly payment = $234.85
Annual payment = $2,818.20
Total payments = $2,818.20 * 4 = $11,272.80

IOP = interest earned on payments over 1 year

Yr_StartBal_Intrst__Pymt_____IOP____EndBal

0___________________________________$10K
1__0________________2818.20__77.50__2895.71
2__2895.71__144.79__2818.20__77.50__5936.20
3__5936.20__296.81__2818.20__77.50__9128.72
4__9128.72__456.44__2818.20__77.50__12480.86

See how your account grew to $12,480.86, but
you only paid yourself $11,272.80? That’s pretty good.

In the next response I’ll show what I think how BOY works. So far BOY doesn’t look as good as above given all equal conditions.