While many wealthy individuals maximize the use of cash value life insurance, there is one group that really understands its value. This same sector of the economy controls nearly every aspect of our economy. Banks.
Cash value life insurance plays a massive role in financial institutions, corporations, and banks. More than you could ever imagine. These organizations buy life insurance by the billions, and use it for many different reasons. Not only does it increase their financial stability and reduce their taxes, it is an ideal place to fund employee pensions, healthcare costs, and other benefits. It’s so common among banks and corporations that it even has it’s own name. Bank-Owned Life Insurance (BOLI) and Corporate-Owned Life Insurance (COLI).
The FDIC makes available the balance sheets of nearly every major bank. The following figures are directly from FDIC.gov[6] and represent the exact amount of money the following banks hold in life insurance.
Banks are in the business of money. They have some of the greatest minds in the world, including economists, attorneys, accountants, financial analysts and other advisors, helping them increase the efficiency and use of their capital.
It is not insignificant that banks place billions of dollars in life insurance. It’s a reflection of the value they place on this powerful asset. For banks, it provides the ultimate in safety, stability, and growth. More importantly, the FDIC allows this asset to be classified as Tier 1 capital, which is the safest capital a bank can have.[7] Tier 1 capital is considered to be the core measure of a bank’s financial strength.
We can learn a lot from banks, but they aren’t the only ones benefiting from this powerful asset. Corporations are also heavily involved in buying life insurance in mass quantities.
In his book The Pirates of Manhattan, the author indicates that over 68% of Fortune 1000 companies use life insurance to fund supplemental executive retirement plans (SERPs).[8] While it has many other benefits and uses for businesses and corporations, it’s interesting to note that in order to fund an employee’s retirement plan, they use cash value life insurance. Its ability to provide the stable growth necessary to create a predictable income is one of its most powerful features. As you’ll soon discover, you too can use it to create a predictable income down the road.
Lies on Wall Street
While banks and corporations are taking advantage of the benefits of cash value life insurance, the rest of America is falling victim to a deadly lie. We are being poisoned with the idea that volatile, risk-based investing in the stock market is the best way to prepare for retirement. We’ve been conned into believing that in order to achieve our goals we must invest our hard earned money into the complex, misleading, unproven theories of Wall Street; that we must put our faith in large Wall Street firms to guess correctly which stocks will perform.
In the 1900s, it’s estimated that over 50% of savings went into cash value life insurance. It was the staple for safety, protection, and predictable future income for decades. It’s only been in the last few decades that people have fallen prey to a contrarian belief. By transitioning money from the safety and guarantees of a cash value life insurance policy to risk in the stock market, Wall Street firms stood to gain a lot. And they did. In fact, since the advent of the 401k and other government plans, the stock market has nearly quadrupled in total assets. This was a huge gain for Wall Street firms and advisors, but a huge loss for Americans.
You see investment firms were a big part of the origination of government plans. They positioned themselves to be the managers of the funds that ultimately made their way to these plans. What’s worse is these companies don’t participate in the same theories they pitch you and I everyday.
I’m not going to take you into the details of how investment firms have taken control of retirement funds, but suffice it to say there has been a massive transition, for the worse, from safety and guarantees, to risky, unpredictable stock market investments. Thousands of Americans are starting to see the outcomes of these failed models, and the consequences are devastating.