Reason number two why you and any money smart person should choose to build a Money for Life economy that lets YouBeTheBank and that lasts in good times and bad:
The government, your employer, or any other outsiders have nothing to say about how you operate your “bank.”
When you put your money in a commercial bank it is subject to the whims of your bank, regulation by federal and state banking agencies and income taxation by the federal government and probably by the state, county and local governments. Your money is secured only by a highly touted but quite limited guarantee. If you put your money in a certificate of deposit or some other banking instrument, you subject yourself to penalties and withdrawal limitations. If you wish to access your money you have to relinquish its earning potential.
Mutual funds, stocks and bonds and other securities are regulated by the SEC. The registered reps who sell these investments are further subject to regulation by FINRA (formerly the NASD). These regulations determine what investments a registered rep can present to you and even the words that can be used when these offerings are discussed. Gains from these investments are subject to a complex set of tax rules that keep attorneys and accountants in spending money. Turning an investment into money is not always an easy or pleasant task, especially when the investment is worth less than you paid for it. Taxation, regulation, limited access to your money: it’s a mess.
State insurance departments regulate and control how cash value life insurance policies are issued and how agents are licensed. The federal government and other regulators do not have any meaningful jurisdiction. This decentralized regulation allows for local oversight and better control. Therefore, the money you deposit into a traditional cash value life insurance policy is not subject to the same limitations or cumbersome regulations as investments. Moreover, it is often better protected by state insurance funds than the money you’ve put in the bank. Invested money is barely portected at all.
Also, the growth within a traditional cash value life insurance policy is not taxed. Dividends from participating policies are paid into the policy tax free and once paid into the policy become a permanent part of the policy. In addition, the money you put into a traditional cash value life insurance, including any dividends that are paid in, continues to grow tax free as long as they remain in the policy.
Finally, you – and you alone – decide when and how you want to take money out of the policy and the terms upon which you wish to redeposit that money. Once a policy is issued not even the insurance company that issues a traditional cash value life insurance policy can tell you how to manage it beyond the terms spelled out in the policy.
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