Bank On Yourself (770 accounts)

[Dog]

Anyone familiar with this concept? My sister sent me multiple emails and is pretty excited about it. She describes it as similar, but not the same as a whole life. It guarantees a 5% rate of return without any risk. It takes advantage of a loophole in the tax policy (7702) that only the rich and banks know and take advantage of.
I've scanned most of the material, but it seems to be a lot of marketing language without giving the real details.
She likes that you can invest your money, earn a guaranteed rate of return with tax free withdrawls on savings and earnings without any penalties.
The material says this is the "secret your advisor and bank hope you never discover". Most of the links are from jimwealthstrategies.com.

[Texas Proud]

Quote:

Originally Posted by Dog Anyone familiar with this concept? My sister sent me multiple emails and is pretty excited about it. She describes it as similar, but not the same as a whole life. It guarantees a 5% rate of return without any risk. It takes advantage of a loophole in the tax policy (7702) that only the rich and banks know and take advantage of. I've scanned most of the material, but it seems to be a lot of marketing language without giving the real details. She likes that you can invest your money, earn a guaranteed rate of return with tax free withdrawls on savings and earnings without any penalties. The material says this is the "secret your advisor and bank hope you never discover". Most of the links are from jimwealthstrategies.com.

Any more info you care to share I do not want to go searching to find out what you are talking about....

[Walt34]

Quote:

Originally Posted by Dog It guarantees a 5% rate of return without any risk.

People more knowledgeable than me will chime in shortly, but I'd run. There ain't no free lunch.

[REWahoo]

Didn't PT Barnum originally come up with this sure-fire investment strategy?

[samclem]

I know it is very heavily advertised on AM radio.

[rbmrtn]

Here's a blog post on it, sounds like a marketing scam as would be expected

https://blog.wealthfront.com/7702-retirement-plan/

[Dog]

Texas Proud - here is a snippet from one of the website:

"Is the 770 Account an Investment?
No. An investment is an asset that can gain in value but also lose value at any time. A 770 Account is a permanent life insurance contract with a mutual based life insurance carrier. The life insurance companies provide you a contract that guarantees to increase your cash value every year regardless of economic conditions. Also, unlike other investments, a 770 Account doesn't need to be sold in order to create liquidity. You always have access to your cash values in the contract without interrupting the compounding growth of your money. There is no surrender penalties and no fees to access your money."

I told her I have term insurance and invest in index funds - prefer to keep them separate and lower cost fee structure. She is still adament this is something special and that I just don't understand. I guess I'll won't try to discourage her anymore as she seems to be sold.

[Sesq]

Its an insurance policy. You can over time pay in to the policy and then borrow it back. All the while you pay a for insurance you didn't need and fees you don't want.

Its also called "infinite banking" there is a long thread on FWF.

Your Advice is Needed: Infinite Banking Concept

As a bonus, we can look forward to new members registering to defend it over the years as this perks up in web searches.

[LOL!]

There it is. That's no ordinary retirement plan. It's a 7702!

Holy Grail: Run Away! - YouTube

[SJ1_]

Quote:

Originally Posted by Dog Anyone familiar with this concept? My sister sent me multiple emails and is pretty excited about it. She describes it as similar, but not the same as a whole life. It guarantees a 5% rate of return without any risk. It takes advantage of a loophole in the tax policy (7702) that only the rich and banks know and take advantage of. I've scanned most of the material, but it seems to be a lot of marketing language without giving the real details. She likes that you can invest your money, earn a guaranteed rate of return with tax free withdrawls on savings and earnings without any penalties. The material says this is the "secret your advisor and bank hope you never discover". Most of the links are from jimwealthstrategies.com.

Here is a good article explaining it:

it’s another name for a life insurance policy, often variable universal life.

[I]A 401(k) or an IRA is an account that holds assets that you own, but an institution has on deposit for you. There are extensive regulations and definitions around companies and organizations that are allowed to hold the accounts and manage the relationship with you.[/I]

[I]A life insurance policy, in contrast, is a contract between you and the company. At its base, the policy is an arrangement between you and the life insurance company. The terms are set at the beginning and generally are highly favorable to the insurance company, and you can’t change them as your life evolves.[/I]
https://blog.wealthfront.com/7702-retirement-plan/

[traineeinvestor]

"life insurance" + "heavily advertised" + "secret your adviser and bank hope you never discover" = three signs its a really bad idea

[pb4uski]

Ask her to find out if she puts $100,000 in and a month later wants out, how much would she get. Ditto with one, three, and five years out.

[growing_older]

Quote:

It takes advantage of a loophole in the tax policy (7702) that only the rich and banks know and take advantage of.

There's your RED FLAG right there. Mysterious plans that take advantage of a secret loophole, or one previously only available to a select cabal, are pretty much guaranteed to be over-hyping, selectively misinterpreting facts or just plain liars. Anyone trying to sell you something by "letting you in on" such a secret is doing you no favors.

[MRG]

Quote:

Originally Posted by growing_older There's your RED FLAG right there. Mysterious plans that take advantage of a secret loophole, or one previously only available to a select cabal, are pretty much guaranteed to be over-hyping, selectively misinterpreting facts or just plain liars. Anyone trying to sell you something by "letting you in on" such a secret is doing you no favors.

Have to agree 100%. Just advertising to catch those without knowledge.
MRG

[FinanceDude]

Quote:

Originally Posted by Dog Anyone familiar with this concept? My sister sent me multiple emails and is pretty excited about it. She describes it as similar, but not the same as a whole life. It guarantees a 5% rate of return without any risk. It takes advantage of a loophole in the tax policy (7702) that only the rich and banks know and take advantage of. I've scanned most of the material, but it seems to be a lot of marketing language without giving the real details. She likes that you can invest your money, earn a guaranteed rate of return with tax free withdrawls on savings and earnings without any penalties. The material says this is the "secret your advisor and bank hope you never discover". Most of the links are from jimwealthstrategies.com.

It sounds a lot like the "Bank on Yourself" mantra...........I got that book free from a friend.........sounds like a total scam.........

You could accomplish a similar thing If you applied and got accepted for a whole life policy from NML, they've averaged about a 6% or more dividend rate ( return of premium due to positive claim experience) for 30 years...not a big "secret" at all...and no universal aspect at all......... However, a "guaranteed rate of return" always sounds fishy..........

[Dog]

@FinanceDude. She did reference "bank on yourself".
Thanks for the responses - I tend to be overly skeptical after being burned on some investments in my early 30's. I let her know today that I was going to pass.

[braumeister]

I dunno. A lot of people who passed on the opportunity to invest with Bernie Madoff (high return, no risk) were kicking themselves later when they saw their friends' account statements.

[Dog]

Good news....she has decided to postpone until she gets more information on what type of returns she can expect.

[samclem]

Quote:

Originally Posted by Dog Good news....she has decided to postpone until she gets more information on what type of returns she can expect.

She's asking the wrong question. She should ask outright about two things: What costs will she pay (all of them) and whether she can get all of her money back when she wants it. Not a loan--whether she can ever get her money back without paying a fee. And she should ask for the answers in writing, something official she can take to court, if needed.

[pb4uski]

Quote:

Originally Posted by samclem She's asking the wrong question. She should ask outright about two things: What costs will she pay (all of them) and whether she can get all of her money back when she wants it. Not a loan--whether she can ever get her money back without paying a fee. And she should ask for the answers in writing, something official she can take to court, if needed.

+1 She should be asking if she needs her money back in 1, 3, 5 or 10 years, how much would she get back.