Heated Debate Between Infinite Banker and Dave Ramsey

[Music] foreign brought to you by the every dollar app start budgeting for free today Jim is with us in Nashville hey Jim welcome to the Ramsey show how can we help hey Dave glad to talk to you you too man enjoy your show thank you all right um I am calling in response to a video I saw recently that you claimed infinite banking concept was a scam and actually got quite pissed off about it so um I um do not agree with that in certain points that you made in that um video and I have set up a policy for my son when he was one years old he's five now I'm sorry um say that again I said I'm sorry yeah so am I sometimes no uh so uh so I set that policy up for was one years old um it has a 500 000 face value we pay 5 373 a year for 13 years and it's paid up at that point um there's a few points that I wanted to discuss that I just didn't agree with um do you want to just kind of take one thing at a time that's fine sure okay um one of the main things was that you claimed that the cash value dies with you and you only get um to face value uh paid out that's true that is well it's not true if you reinvest the dividends back into the policy dividend reinvestment is not cash value dividend reinvestment is because you have a mutual company and the policyholders are the owners of the company and so the profits from the company come to the policyholder and they use that to buy paid up additions that is not the same as keeping your cash value that's buying extra insurance with your overpayment but it still works out to be no um having a cash value much greater than the 69 849 we put into it but the actual cash value not the paid up additions the actual cash value dies with you no because yes it does okay but but your your death benefit is larger than your cash value so it so whoever you're so for me I looked at it because you bought General Insurance you don't want a paid up addition as a paid up addition is buying additional insurance that's why you're getting more at death not because you got your cash value but because you used your policy dividends to buy additional insurance right but that's different than getting your cash value if you if you took those policy dividends and went and bought a term insurance policy for a hundred thousand well you'd get a hundred thousand but that's not your cash value well I have a Term Policy no way but you missed my point okay let you're talking about you use the policy dividends you use the money they send to you because you're in a mutual company to buy additional Insurance yes creative editions yeah yeah if you buy a term policy on the side for a hundred thousand dollars instead with that same money you would get a hundred thousand dollars more than your face value but that's not your cash value that's additional Insurance they're different but in right they are different in term you can't you don't have cash value to borrow again I'm aware of that but your point was that you don't lose the cash value and my point is 100 of the time by definition you lose the cash value okay but okay so as I said Tit for Tat if he lives to be 80 I'm looking at the uh the um read out here if you say he only lives to be 80. okay all right the cash value will be worth about two million dollars but the payout for the death benefit will be 2.6 million so okay technically so you take the cash you take you're taking your bent your policy dividends and go buy term insurance with it and you would have more than you're talking about because you get a better buy on the insurance than you're getting with this ripoff whole life crap yes you would get a high but you wouldn't be able to use it throughout your life as a as your own bank I think that's okay but here's the thing the big thing that's a side issue that's a side issue but your first issue was you know he's going to have all this money at retirement well let's just do a little present value calculation on what you put in for a baby five thousand dollars a year for 13 years do you know what that would be in a mutual fund instead of putting it into this rip-off thing and making four percent on your money and when he dies he loses his cash value if you put this in a good mutual fund you'd have a hundred X 10x the amount of money and that's your infinite freaking bank but I we're only putting in 70 000 and he's going to be that's how present value formula Works in finance you know um look let me just okay take the same I mean I I understand that's intellectual let's intellectually deal with this for a second okay take the same amount of money when you get off the air and put it in a financial calculator at 11 percent and pretend it was invested in mutual funds and see what it is when he's 88 years old it'll be more a whole lot more but and he'll have that too with this to me is a way to no he doesn't have to be able to to borrow against that's what you that's called opportunity cost on your money you put it into something that's going to make him at 88 have two and a half million and he should have had 25 million because you screwed up and put it in the wrong thing well we when we screwed up and put it in real estate too and he's going to get real estate but then put the money in real estate but don't put it in this crap I have to respectfully disagree on what basis he's getting more money if you put it somewhere else but he's able to borrow against this if you've got 25 million in mutual funds you can borrow against it but he's he's gonna have to wait until he's you know to get that amount of money okay so you're going to teach him that the way he becomes wealthy is borrowing against money that his father invested for him that's how he builds wealth said no one rich ever I mean Banks use this product to no they do not you've been watching too much Tick Tock Banks do not use whole life not ever thanks nowhere nobody still I would respectfully disagree no they don't they do not use whole life life insurance what bank well I mean we we could Google it and see what typically Banks do with their money but um I I believe typically Banks never put money let me tell you what banks do they put it in bonds they're required to they wouldn't be allowed by federal regulations to put it into life it's not a place to invest money because it's a horrible investment the rate of return sucks and when you die you lose your cash value I know but says but you also you don't you're making it sound like I'm losing money on the whole you are you're leaving money on the table you're making it sound like when not me but my son when he dies yeah that he's only going to be able to get his he's going to have 22 million dollars less than he should have if you had put this in a good investment you had mentioned that the cash value guys and you only get the face value that's not true that is true that's not I just I just covered that with you for the last 10 minutes paid up additions are the only way that cash value increases unless you're using a Universal Life program B where you pay extra to get the extra insurance which is another form of paid up additions that isn't coming out of my pocket though I put 70. it is coming out of your pocket it's coming out of the policies pocket I know the policy you put the money in dude and then it paid you a dividend and you chose to buy more of this crap with the dividend and you're calling that I kept my cash value no you didn't you bought more insurance well I know that I put in 70 000 and at a certain age it's going to be at age when he's 15 years old that's going to be paid up yeah Jim and you understand what paid up is you understand if you're alive that there's a probability of your death and so 100 of the time that a life insurance program is paid up it means that you prepaid it that's all it means because as long as there's a probability of death there's a cost so the insurance company has always got a cost as long as you're alive so there is no such thing as a paid up that's a that's an industry term that gets suckers like you that's what it is now paid up means prepaid you paid all of the premiums in 13 years for his whole freaking life in advance that's why it's paid up that hey man I think you ought to keep it it's perfect for you but thanks for the call

Channel: The Ramsey Show Highlights

Views: 559,446

Keywords: the dave ramsey show, budget money debt cash, real estate, insurance, how to make money, dave ramsey, save, credit card, compound interest, buying house, buy, snowball, infinite banking

Id: A-NKv_wp8DM

Length: 9min 34sec (574 seconds)

Published: Tue Sep 19 2023