The book advocates for the strategic use of “high cash value life insurance” as a powerful, tax-advantaged savings and wealth-building tool, particularly highlighting its benefits compared to conventional investment strategies like the stock market and traditional retirement plans. Thompson argues that the wealthy, banks, and corporations have long understood and utilized this financial vehicle for safety, growth, and control, and encourages individual investors to adopt a similar approach.
Key Ideas and Facts:
1. Cash Value Life Insurance as a “Personal Bank on Steroids”:
- Thompson introduces cash value life insurance as a historically significant and enduring financial tool, predating the founding of the United States.
- He positions it as a “personal bank on steroids, an unparalleled place to stockpile cash, and a financial bunker for tough times.”
- He aims to demonstrate how the wealthy utilize this as a foundation for their finances.
2. Historical Resilience and Stability:
- The book emphasizes the resilience of life insurance companies during the Great Depression, noting that they “remained virtually unscathed” while banks and the stock market collapsed.
- Owners of cash value life insurance “didn’t lose a dime” and even received profits during this period, highlighting its stability in times of financial turmoil.
3. Examples of Successful Utilization by Prominent Figures and Companies:
- JCPenney: James Cash Penney borrowed against his cash value life insurance to keep his company afloat during the Great Depression. The Grand Rapids Press noted, “…with the money he borrowed on his $3 million dollar life insurance policy, he was able to rebound.”
- Walt Disney: Unable to secure traditional financing, Disney borrowed against his life insurance policies to fund the creation of Disneyland. He stated, ““It takes a lot of money to make these dreams come true… And we had everything mortgaged, including my personal insurance…”“
- McDonald’s (Ray Kroc): Relied heavily on cash value life insurance to overcome early cash-flow problems, cover salaries, and fund advertising.
- Foster Farms: The founders borrowed against their life insurance to invest in their initial farm.
- Stanford University: Jane Stanford used her deceased husband’s life insurance proceeds to fund the university during a period of financial distress.
- Pampered Chef: Doris Christopher used her cash value life insurance policy to fund the initial inventory for her company.
4. Banks and Corporations’ Extensive Use of Life Insurance (BOLI/COLI):
- Banks and corporations invest “billions of dollars” in Bank-Owned Life Insurance (BOLI) and Corporate-Owned Life Insurance (COLI).
- This is used to increase financial stability, reduce taxes, and fund employee benefits like pensions and healthcare.
- The FDIC classifies BOLI as Tier 1 capital, the safest form of capital for a bank, underscoring its perceived value and safety within the financial industry.
- Over 68% of Fortune 1000 companies use life insurance to fund supplemental executive retirement plans (SERPs).
5. Critique of Conventional Wall Street Investment Strategies:
- Thompson argues that the average American has been sold a “deadly lie” that volatile, risk-based investing in the stock market is the best way to prepare for retirement.
- He criticizes the shift from safety and guarantees to risky stock market investments, highlighting the potential for devastating consequences for individual investors.
6. Emphasis on “Smart Risk” vs. “Dumb Risk”:
- Smart Risk: Calculated risk with an understanding of potential gains, exemplified by entrepreneurs like Disney and Kroc.
- Dumb Risk: Uncalculated risk taken without understanding the potential outcomes, which Thompson equates to blindly investing in the stock market.
- He suggests that for many, consistently saving in a conservative, tax-free environment like life insurance is a smarter approach than taking unnecessary “dumb risk.”
7. Tax Advantages of Cash Value Life Insurance:
- Tax-Free Growth: Growth inside the policy (dividends) is considered a “return of premium” and is not taxable.
- Tax-Free Death Benefit: The death benefit passes to beneficiaries income tax-free and bypasses probate.
- Tax-Free Access (through loans): Policy loans are not considered taxable events, allowing access to the cash value without triggering taxes, especially when managed correctly with withdrawals of basis and loans for growth.
- Potential Social Security Tax Mitigation: Utilizing tax-free income from life insurance in retirement may help reduce the taxability of Social Security benefits.
- He contrasts this with the “401k Predicament,” where deferred taxes may result in higher taxes in retirement due to lower deductions and fully taxable income.
8. Accessing Money Through Withdrawals and Loans:
- Policyholders can access their cash value at any time through withdrawals or loans.
- Loans are generally recommended as they avoid immediate tax consequences on growth, keep the policy growing, maintain the death benefit, and encourage repayment.
- Policy loans are contractually guaranteed by the insurance company at competitive rates, collateralized by the cash value.
9. Safety and Security:
- Based on its performance during the Great Depression and subsequent economic downturns, cash value life insurance is presented as an exceptionally safe place for capital.
- Mutual life insurance companies, which pay earnings (dividends) to policyholders rather than stockholders, are highlighted as a potentially better option for maximizing benefits.
10. Flexibility in Contributions:
- Unlike some financial products, high cash value life insurance policies offer significant flexibility in contributions, with no government-mandated minimums or maximums (though insurance company limits may apply).
- Policies can be “frontloaded” with cash in the early years, creating flexibility to reduce or even eliminate future premiums.
11. The Concept of “High Cash Value Life Insurance”:
- This is distinguished from traditional life insurance by its structure, which prioritizes cash growth and accumulation over a high death benefit.
- Proper structuring (“folding,” analogous to a paper airplane) is crucial for maximizing cash value growth.
12. A More Efficient Savings Strategy:
- Using cash value life insurance for savings (e.g., for large purchases or emergency funds) allows the money to grow at a potentially higher, tax-free rate compared to traditional low-interest, taxable savings accounts (reducing opportunity cost).
- Taking loans against the policy for purchases instead of liquidating the cash value ensures the money continues to grow uninterrupted and promotes financial accountability.
- Leveraging policy loans for external investments can potentially increase overall returns by allowing for interest deductions on the loan.
13. Case Studies Illustrating Policy Mechanics:
- Case Study 1 (Consistent Contributions): Demonstrates the growth of cash value and death benefit with consistent annual contributions, as well as potential future tax-free income. Highlights the initial period where cash value is slightly behind contributions due to insurance company risk mitigation.
- Case Study 2 (Lump Sum Plus Ongoing Savings): Shows the accelerated growth and higher potential retirement income resulting from an initial lump sum contribution followed by ongoing savings. Introduces the concept of “backdating” the policy to maximize early efficiency.
- Case Study 3 (Lump Sum Only): Illustrates the flexibility of making a single lump sum contribution with no further required premiums, while the cash value continues to grow.
14. Call to Action:
- The author encourages readers to reconsider conventional financial wisdom and explore the benefits of high cash value life insurance.
- He provides contact information for his company, Real Wealth Financial, for a free financial analysis.
Quotes:
- “I like to refer to this tool as a personal bank on steroids, an unparalleled place to stockpile cash, and a financial bunker for tough times… …but it is better known as cash value life insurance.”
- “While banks, businesses, and government sectors were closing their doors, one sector of the economy stood strong and steady, unaffected by these horrible circumstances. Life insurance companies.”
- “In fact, it was such a stable place to have money that while many people lost everything, those who owned life insurance were paid profits in every single year of the Great Depression, and every single year after.”
- ““It takes a lot of money to make these dreams come true. From the very start it was a problem. Getting the money to open Disneyland. About $17 million it took. And we had everything mortgaged, including my personal insurance…” – Walt Disney“
- “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.”
- “Most people are clearly retiring in higher tax brackets than in their working years. They are losing the tax game.”
- “Growth inside an insurance policy is called a dividend, and by definition, is considered a ‘return of premium.’ Since they are considering it a return of what you have already paid, it is not taxable.”
- “I can assure you of one thing, there is no better asset to die with than life insurance.”
- “The performance of a cash value life insurance policy is based on how it’s structured (or folded).”
- “It’s the idea that you should treat your capital the same whether you use it, or you let someone else use it.”
Potential Biases and Considerations:
- The author is affiliated with a financial company that specializes in cash value life insurance, suggesting a potential bias in promoting this product.
- The book focuses heavily on the benefits of this specific financial tool and may not provide a balanced perspective on other wealth-building strategies.
- While historical examples are provided, past performance is not necessarily indicative of future results.
- Tax laws and regulations can change, potentially impacting the tax advantages described.
- The specific performance of a cash value life insurance policy will depend on various factors, including the insurance company, policy design, and dividend rates (which are not guaranteed).
Conclusion:
Jake Thompson’s “Money. Wealth. Life Insurance.” presents a compelling argument for utilizing high cash value life insurance as a cornerstone of a sound financial strategy. By drawing on historical examples, highlighting the practices of the wealthy and institutions, and emphasizing the tax advantages and flexibility of this tool, Thompson encourages readers to move away from conventional, risk-based investment approaches. The book serves as an introductory guide to understanding the potential benefits of this specific type of life insurance policy as a means of building wealth, ensuring financial security, and creating a tax-efficient legacy. However, readers should be aware of the author’s potential bias and conduct thorough due diligence and consult with independent financial professionals before making any financial decisions.
RYT Podcast is a passion product of Tyler Smith, an EOS® Implementer (more at IssueSolving.com). All Podcasts are derivative works created by AI from publicly available sources. Copyright 2025 All Rights Reserved.
