CHAPTER 6
Looking Ahead
Two roads diverged in a wood, and I— I took the one less traveled by, and that has made all the difference.—ROBERT FROST
Let’s flip the calendar pages into the future so we can observe the journey of Paul and Katie as they take advantage of the opportunities and benefits that Bank On Yourself provides them—one year after they started their plan, and the years after that, all the way through to their retirement.
Here’s how one version of their life’s journey with Bank On Yourself could play out. (The projections that appear here are based on the 2008 dividends. Dividends are not guaranteed and are subject to change.)
Just weeks after Paul and Katie started their Bank On Yourself plans, Katie was already talking to friends who had taken the trip to Africa with one of the groups from their church. Even though Paul had long known this was a dream of hers, he marveled at how she threw herself into the research. Never much of a reader beyond Time magazine and Entertainment Weekly, she was suddenly bringing home armloads of books about Africa and missionary work, and she spent whole evenings making “to do” lists and watching movies set in Africa.
Paul offered to sit down with her and plan the finances. She surprised him by insisting that this was her project and she was going to handle all the planning herself. He was secretly pleased; she had grown up with a strong-willed father who didn’t think women should make any decisions, and was gaining a confidence about financial matters that Paul hadn’t seen before. He only learned by accident that she had been discussing the financial aspects of the trip with Jack Richards, their B.O.Y. Advisor.
At one of those meetings, held three months before she was due to leave, Jack reviewed the details with her. For the month she would be away, Katie would be using two weeks of vacation plus two weeks of unpaid leave of absence. She had made exacting calculations of the costs for airfare, wardrobe items for the climate in Ghana when she would be there—warm, humid, rainy, sticky—plus her food, housing, transportation, and incidentals. Katie was determined to pay for all this out of her own pocket, most of which would be tax deductible as a donation, rather than by raising donations or holding pie auctions, as others going on the trip were doing.
She’d also need to come up with enough money to help cover household expenses, in place of the income she’d be giving up to make the trip. She was nervous about the total—nearly $4,000. Did she really have enough cash value in her B.O.Y. plan to cover that much?
When she sat down with Jack, he relieved her anxiety by reassuring her that her plan by then—one year after starting it—had almost $7,500 of value that she could borrow. He also explained that her plan actually had more cash value than that, but to make sure a policy owner doesn’t inadvertently borrow more money than is available, which could make the policy lapse, the insurance company keeps a small cushion of cash value in the policy.
Even after taking the loan, Katie would still have nearly $3,500 available as an emergency cash reserve. Together they worked out that, after she returned, she would repay the loan over a two-year period, at the rate of $183 a month. And at the end of the two-year payback period, Katie would have the cost of the trip back in her B.O.Y. plan.
Jack said, “Give me only a minute or two and we can fill out a simple form to request your policy loan. Do you want the company to mail you a check for it? Or would you prefer to have the money transferred directly into your checking account? That way the funds could be available to you within a couple of days.”
She asked, “Taking a loan is as simple as that?”
“That’s it,” he told her. “It’s your money. Remember that favorite saying of mine: you can do with it whatever you want, whenever you want. You don’t have to fill out any credit applications or pledge your wedding ring as collateral.”
“When you want to take a policy loan, you
fill out a simple request form. You’re not at
the mercy of banks or credit card
companies. You can have the company
send you a check or transfer the money
directly into your checking account.”
“It sure is nice not to be at the mercy of banks or credit card companies. Just have them transfer the money to my bank account.” And then she added, “I know you’re busy. I appreciate your finding time to meet with me like this.”
“My work for you doesn’t end with designing your plan, Katie,” he told her. “Think of me as your permanent Bank On Yourself coach. I’ll be having meetings like this with you and Paul right through the years. I’ll show you as you go along how to use your policy to maximize the growth, and how to take full advantage of the tax laws. I’ll help you make smart decisions every step of the way for the best possible long-term results.”
“I remember you saying that,” she said. “But I guess I didn’t think about needing your advice all along the way.”
“You know, there are so many variables with these policies. Even for an experienced life insurance agent and financial advisor like me, it still took almost a year of additional training to really grasp all the ins and outs of Bank On Yourself—designing the best plan for each client’s needs, all the variables involved with using your equity in the plan to make it grow at the fastest clip possible, the most tax-efficient ways to take income at retirement, and all the rest. Leaving you to make all the decisions on your own would be like putting you in a sailboat for the first time, tossing you a compass and life jacket, and expecting you to figure out how to reach the coast of England all on your own.”
“I get seasick,” Katie told him.
“In that case maybe the sailboat is an even more appropriate example,” Jack said, laughing.
At home that night, there was one part of Katie’s financial planning for the trip that she was glad to share with Paul: her incredible feeling of being able to make this long-standing dream of hers come true without putting them in debt to a credit card company or a bank. “I have to pinch myself to make sure I’m not dreaming,” she told him. And then she grinned. Paul actually turned off the Denver Nuggets game to listen to her. “I’ll pay back the cost to my B.O.Y. plan and then have all that money to use all over again for another trip or whatever else I want.”
“Yes, Katie—that’s how it works,” he said. She thought he sounded a little condescending, as if what he really wanted to say was, “I’ve been paying attention, I already know that’s how it works.” But she let it go and sat down beside him, picked up the remote, turned the game back on, and stayed there watching it with him. At the next time-out, he went to the kitchen and came back with a beer for each of them. He had even poured hers into a glass.
A few days after they had said goodbye at the airport, Paul was surprised to find an e-mail from Katie. The idea that the remote village the group was headed for had some way that e-mails could be sent out simply mystified him. After she had assured him that the trip, though very long, had gone okay and that the living accommodations were much more primitive than she’d imagined, her message continued:
All of us lugged those heavy bags through airport security, and on and off buses and vans, to bring what seemed like thousands of over-the-counter medications, the headache pills, upset-stomach tablets, cold and sore-throat remedies, and the rest. But the lines of mothers and children who came to see us seemed to stretch into the forest. (At least, when they could be talked into forming lines.) The stash of pills quickly began to look as if it would run out in only a few days.
Later the same week, Paul got an e-mail that talked about “the happy faces of the children, grateful smiles of the mothers, the delight of shy youngsters when they see an image of themselves on the screen of a digital camera.” Katie also wrote:
What we’re doing seems like so little to us but obviously seems to them like such a magical thing. On market day, we buy apples or oranges and the children act as if they had appeared from a treasure chest. One small piece of fruit earns an entire day of smiles and grateful hugs.
I’m so glad I was able to do this. Please give Jack a personal thanks from me.
When Paul met her at the airport on her return, he thought she looked tired, yet with a glow of contentment he had rarely seen.
On a brisk winter day near the end of the third year after the couple had started their B.O.Y. plans, just as Paul was about to head home from work, he received a call from Jack, who had kept track of the Harpers’ goals and car purchases and knew Paul would be thinking about visits to the local dealerships to replace his almost-four-year-old Cadillac. Paul went into Jack’s office a few days later to have a conversation about the car.
“You have more than enough cash value in your B.O.Y. plan to finance that new vehicle yourself,” Jack told him.
“That’s the best news I’ve heard all year. I won’t be making car payments to someone else’s finance company anymore. I’ll be making them to my own B.O.Y. plan, which means I’ll start getting back the cost of my cars, plus the interest I’ve been shelling out to others, right?”
“Absolutely. Those dollars will be lining your pocket, instead of someone else’s. And if you’re like most of my clients, you may be surprised to find yourself actually looking forward to making those payments.”
By borrowing from a B.O.Y. policy to pay
cash for cars and other big-ticket items and
making loan payments back to the policy,
you can get back the money you pay for
those items and recapture interest you now
pay to finance institutions.
“It’s hard to imagine looking forward to making car payments. . . .” Paul laughed.
“You’ll see what I mean. Now about your new car,” Jack said, “any ideas about what you’re interested in?”
“I’m going to stick with another Cadillac. That means I’m looking at another $40,000 car, less the $10,000 trade-in value I expect my current car will have.”
“I’m guessing you’ve never paid cash for a car before.”
“Frankly, I can’t even imagine what it’s like to walk into a car dealership and be able to pay cash. I think those dealership finance people must all be sent away to some camp for a six-month training course called ‘How to make the customer squirm.’ It wasn’t any better when I was leasing. The lower monthly payment seemed like a better deal than financing, but every time, at the end of the lease, I got stuck for the extra miles I put on and every little ding on the body. And then it bothered me that I had nothing to show for all the money I’d spent, after turning the car in.”
“I can practically guarantee you won’t be squirming this time,” Jack told him. “We’ve put together a little resource packet for our clients on how to buy a car at a great price without all the haggling and game playing. You’ll put in fifteen or twenty minutes of research in advance. By the time you walk in, you’ll know what you should be paying, exactly what to say to get the best price, and how to get the most money for your trade-in. And since you’re not going to use dealer financing, you eliminate the worst games the dealerships play that most people never win and hate the most.”
“For the first time in my life, I might actually enjoy this,” Paul replied.
“You can find the car-buying resource packet online,” Jack said. He jotted a note for Paul that read:
Paul said, “Fine—but hang on a second. I see from the policy statements I get every year how my cash value is picking up some steam. Wouldn’t I be better off not using the policy to finance a car now? Wouldn’t Katie and I have more cash value over the long run that way?”
“Paul, this is really going to surprise you, just as it does most of my clients, but when you use your policy to finance things and make the same monthly payment back to your plan that you would have had to make to a finance company, your cash value can actually grow faster than if you didn’t use it to finance things yourself!”
“Whoa,” Paul said. “Did you really say what I thought you just said?”
Jack laughed. “Doesn’t sound possible, right? I’ve gotten that reaction so often that it’s no surprise anymore. So let me explain how that works. If you borrow $30,000 now to finance your next car yourself and pay the loan back the way I’ll show you in a moment, and assuming you never use your policy again to finance another car, or anything else, for that matter, when you reach age sixty-five, you could have about $10,000 more cash value than if you’d never used your plan to finance anything!”
“Incredible,” Paul said. “Just incredible. So if I don’t use my plan to finance things, I’m not doing myself any favors.”
“Exactly. You don’t slow down the growth of your plan by using it this way to buy things, like you would if you took a 401(k) loan or used money you put in a savings or investment account. In fact, although it seems to defy logic, the more you borrow from your plan and make regular repayments back into it, the more wealth you could have.”
Jack chuckled. Paul asked, “What’s so funny?”
“I’m just thinking about my older brother, Mark,” Jack answered. “I was never able to convince him about Bank On Yourself. Maybe it’s because of the sibling rivalry we’ve always had. I think he figures that if he didn’t come up with the idea, it couldn’t be any good. But he liked the idea of letting me finance his cars, instead of using a finance company. So I borrowed the money I loaned my brother from my Bank On Yourself plan, and he’s paying me back. Which means I’m now making the profits the finance company was making on him. Well, it’s worked out fine. He’s made every payment on time.”
“Sounds like you got the last laugh on that deal,” Paul grinned.
“Meanwhile,” Jack went on, “I’m still getting my guaranteed annual cash value increase and the same dividends, even on the amount I loaned to him, so my capital is working for me in two different ways at the same time. To tell you the truth, I feel as if I’m taking advantage of him, but he’s happy with the arrangement, and so am I.”
“If I ever meet your brother, I’ll try to remember not to chuckle!” Paul said.
Jack told him, “Ya know what’s fun? When the cocktail-party or water-cooler conversation turns to who negotiated the best deal on their latest car. You know how it seems like there’s always someone who manages to negotiate a better car deal than you? Well, wait till you see the looks of awe and envy on their faces when you tell them you got the best deal of all—because you’re getting back every penny you paid for your car and then some.”
“I’m looking forward to that,” Paul said with a mischievous smile.
“Okay,” said Jack. “Let’s get you started. I always advise my clients to set up their loan repayment schedule at the same time they take their loan, because unlike borrowing from a finance company, the insurance company isn’t going to require you to pay back a certain amount each month, or even make you pay your loan back. That’s up to you, and to make it really simple, I recommend you have the loan repayments automatically deducted from your checking account every month. It’s easy to set that up at the same time you request your loan.”
It’s a good idea to set up a loan repayment
schedule at the same time that you take a
policy loan. It’s simple to do and you can
choose to have the payments automatically
deducted from your checking account.
“Great. Automatic means one less thing to think about,” Paul said. After a moment, he asked, “But if I do that, what happens if I have a temporary cash crunch and I need that money for a medical bill or whatever?”
“Then we just contact the company and have them stop the automatic deduction. What’s great is that you can do that, if you need to. It’s not like when you use a credit card or a bank loan. You won’t even incur any late fees, and nobody is going to annoy you with collection calls or send a goon squad to repossess your car. You won’t get a ding on your credit report, either.”
“So—nobody’s going to get on my back if I need to skip payments for a while?”
Jack grinned and shook his head. “Not exactly,” he said. “I’ll be on your back. I won’t be harassing you, of course, but keeping after you to get back to your regular payments as soon as you can. Sometimes people think, ‘Hey—it’s my money, I can do whatever I want.’ And that’s true, but by not consistently paying yourself back, you’d be losing out on a lot of the wealth-building power of Bank On Yourself.”
“So how do I figure out the amount I should be setting my monthly payment at?” Paul asked.
“Let me walk you through that. When you take a policy loan, the insurance company charges you interest, of course—at a very reasonable rate.”
“So the amount I pay back every month needs to cover the interest as well. I get that,” Paul said. “And the interest shows up as a credit—an increase in the value of my plan?”
“Yes and no. It ultimately benefits you, but it doesn’t go directly into your policy. Do you remember when we talked about how when you borrow against your cash value, the money doesn’t actually come directly from your policy?”
“Yes. You said it comes from the company’s general fund, because all the cash value in all the policies is pooled together,” Paul responded.
“Exactly. And it works the same way in the opposite direction: the payments you make on your loan don’t go back directly into your policy, they go where they came from—back into the company’s general fund. The company applies your payments of principal to reduce your loan balance. Then, at the end of each year, the company looks at their income from all sources, including the loan interest you paid, and they look at their expenses and the death claims they paid out. As long as their results are better than the worst-case scenario they projected, they pay a dividend to all the policy owners.”
Paul interjected, “Since the company you put me with hasn’t missed paying dividends in a century, I’m not planning to spend much time worrying over whether they’re going to miss in the next few years.”
Jack smiled and said, “No question that’s a great track record. But no matter what happens in the future, you don’t have to worry about getting your preset, guaranteed cash value increases each year. Those are automatic.”
“So even though the interest I pay on my loans doesn’t go directly into my policy, I eventually get the benefit, along with all the other policyholders, through a combination of the guaranteed annual increases, plus any dividends the company pays. Is that it?”
Policy loans come from the company’s
general fund, because the cash value in all
the policies is pooled together. Interest
paid on loans goes back to the general
fund, and the policyholder ultimately gets
the benefit through a combination of
guaranteed annual increases, plus any
dividends the company pays.
“You got it,” Jack replied. “What’s important is that you’re way better off than paying interest to a bank, credit card, or finance company and saying goodbye to both your principal and interest. Or paying cash and giving up the interest and income you could have been getting on your money. The long and short of it is that both the principal and interest you pay ultimately end up in your B.O.Y. plan for you to use over and over again—for another car, a boat, a home theater, home repairs, or whatever you want.”
“I can’t wait to have that happen with my next car,” Paul said. “Thanks for explaining what happens with the interest I pay on my policy loans. So let’s get back to how to calculate what my monthly loan repayment to my plan should be. . . .”
“You could just pay back the loan at the interest rate the company is charging,” Jack explained. “That’s about 6 percent now. For a $30,000 loan over four years, that would make your monthly payment around $705. If you do that, your plan will grow nicely, and you’ll end up with the same growth as you would if you didn’t use your plan to finance things. But it won’t grow as fast as it could. So let’s look at it another way.”
“I think maybe I see where you’re heading. Am I allowed to pay something extra each month? Is that what you’re suggesting I do?” Paul asked.
Jack beamed. “Yes! Right on target. You’re allowed to pay extra. And, yes, that’s what I’m suggesting. You see, any time you run a major purchase through your B.O.Y. plan and pay it back at the interest rate the company is charging, rather than financing, leasing, or paying cash for it, you’re using the Spend and Grow Wealthy method. But there’s an interesting variation we like to use that can result in significantly more wealth for you. We call this the Spend and Grow Even Wealthier way to buy big-ticket items.”
“It sounds intriguing. How does that work?” Paul asked.
“I designed your B.O.Y. plan so that if you pay a little extra on top of the interest you’re being charged, the company will treat that extra amount as additional dollars going into your paid-up additions rider. We’ve talked about that before.”
“I remember about the PUAR. But I’m not sure I understand where you’re going with this.”
“The current car-loan rate finance companies charge is about 7.5 percent. On a $30,000, four-year loan, that would make your payments $725 a month. That’s how much you were going to pay if you financed your next car the way you’ve done it in the past. That’s twenty bucks more than what your monthly payment would be if you just paid it back at the interest rate the company’s charging, and that extra would go into your PUAR. But I’d like to suggest you tack on just a little bit more than that,” Jack explained.
“How much more were you going to suggest?” Paul asked.
Jack replied, “Could you handle a total monthly payment of $750? That’s only $25 more a month than you were going to pay the finance company.”
“No sweat. I don’t think I’d even notice the extra $25.”
“Good,” Jack continued. “Remember when I said that the PUAR is like putting your policy on legal steroids—it really turbo charges the growth of your cash value? Any extra dollars that go into your PUAR will really light a fire under your cash value. That’s what we mean when we talk about the B.O.Y. Spend and Grow Even Wealthier way to buy things. You can end up with a lot more wealth without having to make risky investments. And you can enjoy more of life’s luxuries without the guilt.”
By using the B.O.Y. Spend and Grow
Even Wealthier way to buy things,
you can end up with more wealth
without making risky investments
and you can enjoy more of life’s
luxuries without guilt.
“You know something?” Paul said. “It really makes you think about money and financing in a whole different way. If more people knew about this, our country wouldn’t be in the situation we’re in—people in debt up to their ears, looking to depend on totally unpredictable stock and real estate markets and on Social Security and Medicare for money that probably won’t be there. And there wouldn’t be a retirement crisis either.”
Jack grinned—amused that if anyone had been eavesdropping just then, they might have thought Paul was the advisor and Jack the client.
A few weeks later, with $30,000 from the insurance company in his checking account, Paul walked into the dealership, accompanied by Katie. For once he didn’t feel as if he was going to be embarrassed and intimidated, pressured about options and extras he didn’t need or want. And he definitely knew he wasn’t going to get jerked around by the finance department.
This time it was a snap. Paul had in hand a list of all the options he wanted and was armed with the research he’d done at Jack’s suggestion, along with a printout of what he could expect to get for his trade-in. They both sensed their salesman wasn’t very happy, especially since a customer who pays cash for his car means the dealership won’t collect all the extra money it would otherwise get for writing a car loan. But Paul and Katie knew they were in charge. And they knew there were other Cadillac dealerships in town they could go to if they didn’t like the way they were being treated.
They walked out feeling so elated about how painless it was, and what a great deal they were able to negotiate, that they decided to splurge on dinner at one of Katie’s favorite restaurants.
Over dinner they decided they would call Jack the next morning and start their third B.O.Y. plan so they could finance all of Katie’s cars the same way. And in the process, they would be adding still more to their retirement fund, money they knew they could predict and count on.
When Katie got home from her meeting with Jack about her new plan, she told Paul, “You know what, honey? I’m really glad I kept up with paying my plan back for the Africa trip and the other loan I took to cover what it cost us when I had to help my father after his surgery. I’m all caught up now. I’ve paid my plan back for both the loans.”
“That’s good news,” Paul said.
“Wait, wait. You haven’t heard the really good news yet.” Flinging her arms around his neck, she said, “That B.O.Y. plan of mine now has way more than enough cash value in it to go on our dream trip to Paris!”
They had hardly started their planning before they realized they weren’t going to have to make it a no-frills trip. They understood that they’d be able to save for retirement and enjoy the good things in life. Simply by paying for luxuries using their Bank On Yourself plans, and then paying the money back, they would be able to enjoy living well, guilt free—because they wouldn’t be missing a single beat in financing their retirement.
Paris didn’t turn out to be what they had imagined; it turned out to be vastly better—it was magical, with memorable sights everywhere they looked, from the architecture of ancient buildings, to the oh-so-French atmosphere of the streets, to the romance of the sidewalk cafés, to the lights of the city at night. Everything was so steeped in history that it almost felt like a trip back in time. The challenge for Katie had been whether to take a weeklong cooking class and have only a couple of days for sightseeing, or take a one-day class and be a tourist for most of their stay.
She decided to take the one-day class at the International Kitchen, and eat great food rather than spend more days cooking it. They had dinner one night at the three-star Benoît, for as much money as they usually spent on three months of eating out, but they agreed it was worth every euro. And they had fabulous meals at little restaurants and cafés that they picked at random.
They saw the Eiffel Tower, Notre Dame Cathedral, and the Arc de Triomphe, went to the Louvre and the wonderful Musée d’Orsay (which they liked even better), and took an unforgettable nighttime boat ride on the Seine. They came home exhausted, but both feeling changed, exhilarated, and eager for more travel.
When they dropped by to see Jack, they were armed with a selection of photos for him to choose from for his wall. And they were already talking about where they would go next. Katie’s B.O.Y. plan by then was already growing fast enough that they realized they’d be able to take their next dream trip in only another two years. “And,” Jack told them, “you should be able to take off for a new destination every couple of years until you run out of places you want to go.”
To Paul, Katie looked as happy as she had been on her wedding day.
Though the trip to Paris was the experience of a lifetime for Katie and Paul, coming back to Denver didn’t turn out to be as happy. They’d been back less than two weeks when Katie’s father, in Minneapolis, took a bad fall and had to be moved into an assisted-living facility. Katie flew back home twice to help her sister sort through the lifetime collection of items and decide what to dispose of. The cost of the trips, and the additional time away from work, put an unexpected crunch on their cash flow.
She and Paul discussed the situation with Jack. “It’s at times like this that the flexibility you have with Bank On Yourself plans can be a real lifesaver,” he told them. “You have several options you can fall back on to get through a cash-flow crunch like this.”
Katie relaxed into her chair as Jack continued, “You could skip paying back the policy loan you took for your trip to Paris for a while, or you could take another policy loan from your plan or Paul’s plan and not count on repaying it right away. Or you could scale back or skip the paid-up additions rider portion of your premium payment for a while. Or you could do a combination.”
Jack explained that he had set up their B.O.Y. policies with a company that offered a very flexible paid-up additions rider. “You’re allowed to put in all, some, or none of the full amount of the rider every year. I know you’re committed to putting in the full amount so your plan will grow as fast as possible, but when cash flow is a problem, the company allows you to make up the difference in future years.”
If an emergency comes up or you have
a cash-flow crunch, a B.O.Y. plan gives
you flexibility to skip some loan
repayments. Some companies offer
a flexible PUAR, which allows you to
put in all, some, or none of the full
amount of the rider each year.
After discussing their options, the couple agreed that they would stop paying back the loan they’d taken for the Paris trip until their financial situation improved. Jack explained that if they didn’t repay an amount during any year at least equal to the interest due on the loan, the insurance company would simply deduct the interest from their cash value at the end of the policy year.
Katie looked at her husband. “And let’s take another policy loan to pay back the costs of my trips to Minneapolis. I put it on a credit card, but by transferring the cost into our B.O.Y. plans, we’ll get the cost of the trips and the interest back.” To Jack she said, “You can’t even imagine what a relief this is.”
“Actually, I can,” Jack said. “And it’s not just that I’ve been through this with a number of clients before you. There was a time when I had to do the same thing myself, taking multiple loans and holding off on repaying loans I’d already taken from my own policies.”
Katie looked at him with new eyes. “I guess that makes us members of the same club,” she said.
In the years that followed, Katie and Paul made trips to Tuscany, Hong Kong, Thailand, Brazil, and Tokyo. As their incomes grew, they started additional B.O.Y. policies, eventually owning seven between them. And along the way they decided to stop funding their 401(k)s altogether, due to poor and unpredictable performance, and the fact that both their employers had stopped matching contributions.
On one of their regular visits with Jack, he told them that the first of their plans had reached the point where the premiums could be paid “internally.” This meant, he explained, that the dividends in their plan could be sufficient to be used to pay future premiums.
Shortly after Paul’s fifty-eighth birthday, he passed out in the middle of a meeting at work and was rushed to the hospital. It turned out to be a heart problem; Paul, who had been as healthy and fit as any man they knew in his age group, underwent triple bypass surgery.
As if that weren’t scary enough, after the surgery they received medical bills—from the doctors and physical therapists, the anesthesiologist, and the hospital—totaling more than $22,000. That’s how much Paul was responsible for, after his company health plan had paid its share. “The deductible, copayment, and noncovered items,” they were told by way of explanation.
Twenty-two thousand dollars! They learned that unexpected medical expenses cause 50 percent of bankruptcies and that 75 percent of those folks had health insurance at the time.
Even though it hurt, Paul actually managed a laugh when he found out that they needed to come up with $22,000. Katie was baffled by his reaction. “We’ll just borrow it from one of our Bank On Yourself plans,” he told her. “Imagine what it would have meant if we didn’t have Bank On Yourself and had to take the money out of our 401(k)s or put it on credit cards.”
A B.O.Y. plan can provide a cash cushion
to help you weather unexpected medical
expenses, disability, job loss, or
other emergency.
Just two years later, Paul had paid back the loan to his B.O.Y. plan. He bragged to Katie, “We actually made a ‘profit’ on the medical bills for my surgery! How many people do you think can say that?”
Paul and Katie retired the year they both turned sixty-eight, as they had planned all along. Because they had been faithful through the years about paying back all the policy loans the B.O.Y. Spend and Grow Even Wealthier way—adding a little extra to each payment to go into the PUAR—the combined total of their seven Bank On Yourself plans turned out to be just as good as Jack had originally projected. Even after spending for the foreign travel, the new cars every four years for each of them, and Paul’s surgery bills, they were, as the saying goes, sitting pretty.
Though the value of their B.O.Y. plans turned out fairly close to what had been predicted, they still found the numbers astounding. On more or less average incomes, the total amount they could access by the time they retired at sixty-eight had reached close to $1.25 million, just from the first two of the seven B.O.Y. plans they had started. Those were the plans they had funded primarily by redirecting money they had been contributing to the 401(k) plans they felt they couldn’t count on into B.O.Y. plans that they knew they could.
And all along, they both had the comfort of knowing that if either one of them died, the other would receive the full current death benefit of the policy, less any outstanding loans. The added peace of mind and the freedom to fully enjoy their retirement felt like a blessing.
Living to age ninety and beyond had become common, and Jack had always insisted Paul and Katie plan their finances as though they would live to be one hundred. That meant they were able to take a retirement income of around $70,000 a year, just from their first two B.O.Y. plans, for a total of $2.31 million over those thirty-three years of retirement, because their plans continued to grow while they were taking income.
Primarily by redirecting money they had
been contributing to the 401(k) plans they
couldn’t count on into B.O.Y. plans they
knew they could, Paul and Katie could have
$2.31 million of retirement income.
Looking back, they were very grateful that Paul had taken Rob up on that bet all those years ago.
This story of Paul and Katie paints a picture of what life might be like for one couple who embrace Bank On Yourself.
In the chapters that follow, you’ll meet real folks from all walks of life who have agreed to share real-life stories of their own personal Bank On Yourself journeys.
