Become Your Own Banker: Nelson Nash Infinite Banking
Nelson Nash book Becoming Your Own Banker introduced infinite banking to the masses. Here is what it actually teaches and how to implement it.
Key Takeaways
- 1Nelson Nash popularized using whole life insurance as a personal banking system
- 2The concept focuses on recapturing interest you would normally pay to banks
- 3Requires high-premium whole life policy from mutual insurance company
- 4Takes 10-20 years to fully implement and see maximum benefits
- 5Best suited for disciplined, high-income individuals
- 6Simpler alternatives exist for most retirement savers
Who Is Nelson Nash?
Nelson Nash (1931-2019) was a financial consultant who developed the Infinite Banking Concept:
- Published Becoming Your Own Banker in 2000
- Forestry consultant turned life insurance strategist
- Developed IBC after studying Austrian economics
- Founded the Nelson Nash Institute to teach the concept
- The book has sold over 500,000 copies
- Sparked a movement of Authorized IBC Practitioners
- Controversial legacy: Praised by some, criticized by fee-only advisors
Nash Core Insight
Nash observed that people lose enormous wealth by financing major purchases through banks. His solution: create your own family banking system using dividend-paying whole life insurance.
Nelson Nash Core Principles
The book teaches several key concepts:
- 1. Banking is necessary—the question is WHO profits from it
- 2. When you borrow from a bank, you enrich them and impoverish yourself
- 3. Whole life insurance can function as a personal bank
- 4. You can borrow against cash value and repay yourself with interest
- 5. Your capital compounds uninterrupted even when borrowed against
- 6. Over a lifetime, you recapture interest paid on cars, homes, etc.
- 7. Dividend-paying whole life from mutual insurers is essential
- 8. This is a multi-generational wealth-building system
Nash Car Example
Instead of financing a $40k car at 6% over 5 years ($46,600 total), borrow from your policy, buy the car, and repay yourself $46,600. The interest stays in your family instead of going to a bank.
Implementation Steps
How to actually implement Nash strategy:
- 1Work with an IBC-trained agent to design a policy (NOT any life insurance agent)
- 2Buy a dividend-paying whole life policy from a mutual company
- 3Structure it for maximum early cash value (high early cash value rider)
- 4Pay maximum premiums allowed (often $10k-50k+/year)
- 5Wait 5-7 years for cash value to build substantially
- 6Take your first policy loan for a major purchase (car, investment, etc.)
- 7Repay the loan with interest over time (create a repayment schedule)
- 8As cash value grows, use it for larger purchases (rental property, business)
- 9Continuously recycle: borrow, repay, grow
- 10Maintain discipline—treat it like a real bank
| Phase | Timeline | What Is Happening |
|---|---|---|
| Setup | Year 1 | Buy policy, pay first premium, minimal cash value |
| Building | Years 2-7 | Pay premiums, cash value growing, near break-even |
| First Loans | Years 8-15 | Start borrowing for purchases, repaying yourself |
| Maturity | Years 15-30 | Large cash value, borrow for major investments |
| Legacy | Year 30+ | Multi-generational system, death benefit to heirs |
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Realistic Timeline to Full Implementation
Nash strategy is NOT a quick fix—it requires patience:
- Years 1-3: Mostly paying fees and commissions, little cash value
- Years 4-7: Cash value accelerates, approaching premium break-even
- Years 8-12: Start taking modest policy loans, building discipline
- Years 13-20: System matures, can finance major purchases
- Years 20+: Full implementation, large capital pool
- Key point: This is a LIFETIME strategy, not a 5-year plan
- Nash himself emphasized: Think in decades, not years
The Patience Requirement
If you need results in 5 years, this is NOT the strategy for you. Infinite banking requires 10-20 years to fully mature. Early exit results in losses.
Common Criticisms of Nash Approach
Financial advisors and critics point to several issues:
- Returns: 3-5% annual growth is inferior to stock market 8-10% historically
- Fees: 50-90% of first-year premiums go to agent commissions
- Opportunity cost: Money in whole life cannot grow in index funds
- Complexity: Most people lack discipline to repay loans properly
- Conflicts of interest: Insurance agents heavily incentivized to sell
- Misleading math: Illustrations often show ideal scenarios that do not play out
- Better alternatives: 401k, Roth IRA, HSA should be maxed first
- Marketing: IBC practitioners often oversell benefits to earn commissions
| Nash Claim | Reality Check |
|---|---|
| Guaranteed returns | Only 1-3% guaranteed, rest is dividends (not guaranteed) |
| Uninterrupted compounding | You are paying 6% interest while earning 4%, net loss |
| Become your own banker | You are borrowing your own money, not creating new wealth |
| Tax-free income | Only loans are tax-free; withdrawals may be taxable |
| Better than market | Whole life returns lag stock market over long term |
Who Should Actually Use This Strategy
Infinite banking makes sense for a small subset of people:
- High income: $200k+/year with significant surplus cash flow
- Maxed out retirement: Already contributing max to 401k, IRA, HSA
- Business owners: Need liquidity for business investments or opportunities
- Long time horizon: 20+ years until retirement
- Financially disciplined: Will treat policy loans seriously and repay
- Want life insurance anyway: Need permanent coverage for estate planning
- High net worth: In top tax brackets seeking additional tax-advantaged growth
NOT For Most People
If you are not maxing your 401k and IRA, or if you have credit card debt, or if you cannot commit $10k+/year to this strategy, infinite banking is NOT for you. Focus on traditional retirement accounts first.
Be Skeptical of IBC Practitioners
Many Authorized IBC Practitioners are life insurance agents earning 50-100% of your first-year premium as commission. This creates massive conflicts of interest. Get second opinions from fee-only financial advisors before committing.
Alternative: Gold IRA for Self-Directed Wealth
If Nelson Nash appeal is controlling your wealth outside Wall Street, consider a Gold IRA instead:
- Physical gold ownership—no insurance company counterparty risk
- Lower fees than whole life insurance (no 50-90% upfront commissions)
- Proven 5,000+ year track record as store of value
- Tax advantages similar to traditional retirement accounts
- Simpler to understand and manage than policy loans
- No repayment discipline required—it is YOUR gold, no loans needed
- Appeals to same alternative to mainstream finance mindset
Frequently Asked Questions
1Should I read Nelson Nash book before starting?
Absolutely yes. Becoming Your Own Banker is essential reading if you are considering infinite banking. It is a short book and will help you understand the philosophy and avoid being sold a bad policy.
2Can I do infinite banking with a policy I already own?
Maybe. If you have dividend-paying whole life from a mutual company, it might work. But many existing policies are not optimized for IBC (too much death benefit, not enough cash value focus). Have an IBC practitioner review it.
3What is the minimum premium needed to make this work?
Most IBC practitioners recommend at least $10,000/year, with $20,000-50,000/year being more typical. Below $10k/year, the fees eat too much of your contribution for the strategy to be effective.
4Is infinite banking a pyramid scheme or MLM?
No, it is not a pyramid scheme. It is a legitimate life insurance strategy. However, some insurance marketing organizations (IMOs) use MLM-style recruiting to build agent networks, which adds to the scammy perception.
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