If you’ve heard of the infinite banking method of building wealth before, you’d probably thought of it as a genius strategy. But Tom Laune takes it a lot of steps further. Infinite banking is just one of the elements of the Bulletproof Wealth strategy, a holistic approach to wealth building that Tom created and trademarked. In this conversation with Jack Krupey, he explains what this strategy entails and why there’s so much more to it than what other infinite banking experts can give. He also explains the tax advantages of the strategy, as well as how it holds up amidst inflation and a possible recession looming. Tune in to this episode and visit Tom’s site at https://bulletproofwealth.info/. You’ll get a treat of amazing resources that will help you on your next step to financial freedom.
Listen to the podcast here
Be Your Own Bank With Tom Laune
I got a great guest for you all, Tom Laune from Bulletproof Wealth. Thanks for being on the show.
Thanks for having me. I’m excited to be here.
It’s great to have you. We got the privilege to spend some time together at a couple of masterminds. It’s a joy getting to know you. Our audience is going to appreciate hearing your story and what you do in the overall real estate and financial business. Tell us a little bit about yourself and your background.
I started, believe it or not, as a professional in the music industry. I did that for several years. I got to work with a bunch of great bands. Several years ago, I got out of that completely. It’s an interesting story as to how I got out of that and what is going on. I had a partial hearing loss. In the music business, you can’t function if you can’t hear well. My main job was as a recording engineer, mix engineer, and producer, working on high-level artists like R.E.M., Bruce Springsteen, and hundreds of good artists.
All of a sudden, I was not able to keep doing that job because I couldn’t hear properly out of one ear. All that you’re doing is you’re making a living on hearing. I was the guy doing all the mixing of the records and everything. It was crazy. While I was in, I had a wild story that I love to share with you about being in the music industry.
I remember my doorbell ringing one afternoon when I was in the music business and when I opened it, I was surprised to see my own personal financial advisor standing there. He had this bad troubled look on his face. I invited him in. I was like, “What in the world is going on?” Honestly, I began to feel sick in the pit of my stomach as he unraveled this crazy story of how he had lied to me and used my money for his own financial gain.
Honestly, it was quite a scene because this ended with him crying and begging me not to turn him in to the authorities. I thought this could not happen again because this wasn’t the 1st or the 2nd time. This had happened before. This was several years in the music business. I had 3 out of 4 financial advisors that turned out to be fraudulent, and 2 of the 3 of them ended up in jail. That third guy should have gone to jail.
I didn’t realize it, but I was in an industry that was preyed on by financial people trying to take advantage of less sophisticated. It probably doesn’t happen as much in the real estate business. I don’t know, but in music and sports, it’s pretty rampant. Unfortunately, my story is not unique because there are a lot of you guys out there reading who have had a trusted financial professional abuse that trust.
That’s my why. I decided to do something about this several years ago. I made a career change from the music business to the financial business. I wanted to be one of the guys who told people the real deal and was straight up with people. I heard a podcast, Jack, about saving money in life insurance to use like a bank. Like many of your readers, I’m sure, I thought, “If this is great, why isn’t everybody doing it? What is going on with this?”
I thought it might be another scam. I started researching it because I was super intrigued by it. I read all kinds of books and went to conferences. I ended up trying it myself. Not only did it work, Jack, but it way exceeded my expectations. That’s when I decided to go back to school. I spent four years. I got three financial designations. I’m a chartered financial consultant, life underwriter, and special needs consultant.
I did all of that so I could help others, not spend the time and the money that I did to have to go through and learn all of this because, believe me, it is not taught in traditional education for which I have been through all of it for the financial services business. They don’t teach about saving money on life insurance. That’s how I got into doing this.
This is a great story, but it’s also a challenging story. It does explain your why after living through some of those challenges. You are well-positioned to do a better job because of it. One of the things I like about our conversations and this show is that I have never been a big fan of the traditional mainstream stocks, bonds, or index fund type of investing. It’s a fit for certain people, but I always found better returns through real estate, niche-type opportunities, and other interesting angles. The wealthy tend to take advantage of a lot of these opportunities that the average investor putting money into a mutual fund and a 401(k) doesn’t think of.
One of the key terms is infinite banking, which I know is a buzzword. If you could, explain that and what your thoughts are on infinite banking and the types of things you do for our reader base, which is largely more active real estate investors, or more savvy high net worth investors looking for better than average opportunities.
The strategy that I have trademarked is called Bulletproof Wealth. One of the elements that it incorporates is infinite banking. I distanced myself a little bit from that term because it’s narrow and focused. I take a much more holistic approach when working with my clients. I have a lot more financial education designations and background than the traditional infinite banking person.
I understand it. I have been an authorized infinite banking practitioner since the program began back in 2013. It was when I went through that program. I love helping people understand how it works, but I will give you the basics of it. It’s not an investment. It’s an alternative place to store capital than saving in a traditional bank. It’s another place to save money while you’re waiting for an investment opportunity to come along. That is the key differentiator.Infinite banking is an alternative place to store capital, to save money while you're waiting for an investment opportunity to come along. Click To Tweet
It’s not trying to make you over wealthy. It’s giving you a great place where you can earn money through dividends while you’re waiting for that great opportunity to come along. When your investment opportunity comes along that you want to do, you don’t pull money out of this place. You don’t pull money out of a life insurance policy. You borrow against it using collateralization, like a home equity line of credit.
The way that I try to help people understand is that it’s super similar to a home equity line of credit. Most people know how that financial instrument works. How saving money in life insurance differs is that the credit amount increases every year. With the home equity line of credit, it’s fixed every year. With a life insurance line of credit, it increases every year. The equity in your house is the collateral. With life insurance, the cash value is the collateral.
The cash value is the equity in the policy, and banks love this as equity. It could not be any stronger equity than the cash value in life insurance, specifically, whole life insurance. They don’t like universal or index universal life because it doesn’t have the same collateral capacity as whole life. The big thing is that with a home equity line of credit, you may or may not realize this. When you take a loan against a financial instrument like that, it impacts your credit score because it’s reported to the credit reporting agency, and with a life insurance line of credit, there’s zero impact on your credit score.
Your home equity line of credit doesn’t earn you any money, but with a life insurance line of credit, it grows every year through dividends, which is a return of profit for the company. Your home equity line of credit can go down, and they can pull it back if your home value decreases, but your life insurance line of credit goes up every year, no matter what.
Some of the most similar financial products is a home equity line of credit. Those are some of the differences. I do this myself, and I do it at a high level. I have nine whole life policies. I try to funnel as much of my own personal income as possible into my policies. When someone like you comes along with a great investment idea, that’s where I take a loan against those policies to put into the investment. It is an amazing thing to still be earning dividends and be over here investing at the same time.
Inflation is very much in the news. How does that affect the strategy for someone like you who already has these, and how does that affect someone who’s starting one now with the potential for higher interest rates?
I can tell you right now that the higher the interest rates go on prime, the more that ultimately dividends are going to go because they utilize vehicles that have been difficult in a low-interest rate environment. They are going to be paying out more dividends as the years roll on here in this newer, higher interest rate environment. The other thing is that you have to have the dry powder in order to be able to make an investment when it comes along.
The Feds did a print on July 13th, 2023 and it was 9.1%. It’s not good. That means that inflation came in higher than expected. That is not good because that means that the Federal Reserve is probably going to do another rate hike to try to curb inflation. We don’t want to have our money sitting in a traditional bank, earning nothing in interest or next to nothing in interest, because you are losing purchasing power by leaving it there. The bottom line is that having money inside of a life insurance policy helps mitigate that inflation risk because while you’re waiting for an investment opportunity, you’re also earning money.
Some people will use this as somewhat of an alternative to IRAs because there is some tax-deferred growth. Can you talk a little bit about taxes and tax benefits for those that are in the higher brackets?
If you are looking at doing a Roth-like structure, you get phased out at a certain income level. That income level is somewhere around $185,000 to $190,000 a year. When you make more than that, the only way to access a Roth is through backdoor mechanisms. It is not easy to accomplish all of that. Normally, people who are putting money into Roth accounts fall into that less than $190,000 category, and you can’t get much in them, $6,500 a year or something like that.
With this structure for taxes, it is advantageous. Other than a Roth account, the only thing that you can have is a clear path to pulling out money tax-free in retirement. The way it works is that you put in after-tax dollars. It grows tax advantage. In retirement, you pull it out tax-free if you do it correctly. The reason I have to put that caveat on it is that you are going to have a lot of capital gains inside these policies, and you can’t take the gain out.
You distribute the basis out or all the money you put in, and that comes out tax-free. When you hit your gain that is in the policy, you take collateralized loans that you never pay back. You end up building up this huge ginormous loan balance in retirement that gets paid off by the death benefit. The balance of the death benefit goes to your beneficiary. It’s amazing the way this works, and they call it first in, first out taxation, in which normal investments are last in, first out.
If you had $100,000 of Apple stock, and it grew to $200,000, if you pulled out $100,000, they would consider that all the last money coming out would be the gains. You would be taxed on that money. With life insurance, if you have a $100,000 basis and it grows to $200,000, when you pull the $100,000 out, they consider that your basis or your first money in. First in, first out. It’s huge in the end. It’s a massive tax advantage.
If when you, unfortunately, pass away as we all do. Is it typically transferred tax-free?
For estate planning issues, the death benefit is always tax-free. That is the beauty of this. If you have a huge loan balance, that gets paid off, and the balance goes tax-free to your heirs. If you decided you didn’t need the money in retirement and you let the life insurance grow, you’re still going to pass on to death benefit tax-free. It has a huge amount of tax advantages.
I don’t see them changing anytime soon because there is not enough money overall in these types of policies that I do. It would make a huge impact if there were a tax law change regarding that. It’s not low-hanging fruit. They’re way more likely to come after 401(k)s or something if they’re needing more money than they would on the cash value of life insurance.
We had some scares with the IRA programs in 2021. We had a headline about Peter Thiel. All of a sudden, Congress was almost going to change the rules because of one guy with a few billion dollars in his IRA. None of us can predict the future, but what are your thoughts on the overall economy? You mention rates going up, several plus year upswings minus the three months scare during the beginning of COVID?
I don’t have a crystal ball. I don’t know what’s going to happen for sure, and honestly, it’s hanging on a lot longer than I thought before we had another serious recession. I do not see with all of the monetary policy of printing money hand over fist during the COVID years that this isn’t eventually going to have a bad outcome. You cannot print that much money without having inflation.
I would like to take a minute and define inflation because there are a lot of people that say out there that inflation is rising prices, but that’s a side effect of what inflation is, which is an expansion of the money supply. If you have more money chasing the same amount of goods and services, there is no way that those goods and services aren’t going to have to go up to somehow equalize with this massive amount of new dollars being printed.
That is what’s happening right now. I don’t think this whole situation in Ukraine is the cause of the gas increase. It was the massive amount of monetary inflation that happened and had been happening for the last several years. That is causing the prices to have to try to equalize and catch up to the amount of new money that’s in circulation.
The Russian-Ukraine thing is only making things move a little bit faster with the fewer exports of wheat, oil, and gas. We will see how it plays out. Neither of us has a crystal ball. What are some key questions you will ask potential clients of yours? Who do you look for in potential people to work with? What are some tips or key questions you typically like to ask as you’re getting to know them?
The only thing that they have to do to be able to work with me is they have to be moderately healthy because getting qualified for life insurance is based on your health. You have to go through somewhat of a health questionnaire. The second thing is that the amount of life insurance that someone can qualify to own is based on their income and their age. There’s a correlation where the older you get, the less life insurance you can buy. As a young person, you can buy quite a bit relative to your income, but it reverses as you get older. The older you get, the less you can buy.
What they are ultimately trying to do is replace income. They do this on a 4% income replacement ratio, which means for every $1 million of life insurance, you’re replacing about $40,000 of income. For example, $5 million of life insurance replaces about $200,000 of income from a life insurance company’s perspective. The question I ask is, “What is your income? How old are you and how healthy are you?” This only works for US citizens because everything I do is based in the US with US life insurance companies.
US citizens are another key qualifier. I typically work with people who are phasing out of being able to do Roths in the $200,000 plus income range. I can go through all of their financial situations. Anybody reading, I can go through your financial situation and help determine if this is a good fit. Sometimes it is an unbelievably good fit. Other times, it doesn’t make sense due to a health constraint or some other reason why which it’s not feasible to be able to get the product.
It is not traditional whole life insurance. That’s the thing I need to emphasize. It’s specially designed, and normal whole life insurance has no cash value at all for the first several years. In this, you have an immediate large amount of cash value that you can collateralize with and get a loan within 30 days. It’s not a long period of being without your capital. It’s a short period to be able to get this loan, to be able to invest in what you wanted to invest in.
I’m glad you said that because that is the one thing I always think of. That is the first risk I think of on anything in the life insurance realm. Usually, the first year or two is commission only, and there’s no cash value for a number of years.
I designed these things to put in as much money as possible for the least amount of life insurance so that the IRS still classifies it as life insurance. If you overfund a policy more than their IRS guidelines, they consider it a modified endowment contract, and you don’t get the tax advantages. I put in as much as possible for the least amount of life insurance as possible to build that cash accumulation up as high as possible. All of this minimizes commissions because if you have access to your capital, there are no commissions on it. What I’m doing is working on volume and minimizing the number of commissions that are paid. That’s why I love doing this and helping people figure it out.
We have a bunch of mutual friends and contacts through these mastermind groups. You have a stellar reputation across the board from anyone I have talked to. What type of things are you investigating personally with your borrowing from these policies?
I do some private lending. If somebody has a loan that they need, a bridge loan or something like that, I try to get in the first position if possible, but I will do private lending with it. Another friend of ours does that a lot. I do self-storage. I like self-storage as an investment class. I’m invested in a self-storage facility. I do a lot in the energy space because energy is one of the unique investments that can offset active income. I invest in carbon capture technology and a bunch of alternative stuff. I invest a lot in ATM machines. I do a lot of things that pay a residual income. I can use that to pay back the loans that I make.
I’m not into speculation. In other words, I don’t like to take a lot of risks. I like to invest in something that I know that I’m going to earn a higher percentage return than I’m paying to the insurance company. If you have a few minutes, it would be good because I think like a banker and I try to teach people how to do that. What banks do is they take money in on deposit. They find somebody to loan it out to, and they pay the money they take in on deposit. They pay that deposit at on low-interest rate. They turn out and make a higher interest rate by lending out the money to a borrower.Just because you haven't heard about infinite banking before, don't just throw out the concept. Do a little bit of research on your own. Click To Tweet
What I do is think like that because I have my own privatized bank that I have built up over the last several years. I’m looking for interest rate arbitrage opportunities. I’m looking for opportunities to make more in return than I’m spending on the interest cost and therefore make money as banks do. It’s a powerful wealth-building vehicle to be able to do that with.
I don’t think we talked about carbon capture, oil, and gas. I’ve dabbled in that over the last few years because I have a number of investors in my fund that have high W-2 or high ordinary income. I started testing the waters, A) to diversify, but B) because I wanted to test it with my own money before potentially referring it to people who are already investing on the real estate side. I’m not an oil and gas guy, but I was fortunate to get in. One time, I’ll say, “Thank you, Putin.” The one and only time because it has skyrocketed the prices. We can talk offline. I’ve got a group that is doing well for me. I like to compare notes with you on what you have done well.
The thing I like about it is that it’s not this, “We’re going to drill a well, and we may or may not hit anything. It may come up as a dry well, and you may get a tax deduction.” It’s not that. I don’t like that because that tips me off into the speculation realm. I prefer to hit the jackpot or get nothing. I would rather have a steady return. As long as it’s more than I’m spending on interest, I’m happy.
The tax benefit is pretty amazing as well off of ordinary income. It’s 30% percent less of a check to write to the IRS the first year.
There’s nothing that quite works like that. It has been good. I love alternative asset class investing. That’s my specialty. That’s what I love doing. I don’t advise people on that what exactly to do because I position people’s money to be able to take advantage of it. If somebody wants to know what I’m doing, I’m happy to explain it, but I don’t want to get into an advisory role on that because of the liability associated with it.
I’m in the same boat there. We run a Reg D 506(c) fund. If it’s my own fund, certainly. It’s a mastermind. I’m happy to compare notes, but I don’t think I’m going to probably try to avoid it at all costs by getting a bunch of other letters at the end of my name and a bunch of compliance. I’m sure you have had enough of that with the insurance side of things.
I do have a ton of compliance, a bunch of ongoing CE, and all kinds of things I have to do to maintain the insurance side. I would not look forward to doing that in the series licensing.
How many other masterminds are you in? We’re both members of Power Room? I think you have a couple of other ones.
I have been involved in another mastermind that was real estate investors specific for a number of years. I decided to go more into the Power Room and go full throttle in that because I like the diversification of background in that particular one. There is a couple of other ones that I have looked at, but in terms of being actively involved, if you do too many masterminds, it’s hard to get anything else done, to be honest with you. I went six to six masterminds at least in 2021. I got to put the brakes on that a little bit.
For me, it’s more of a diet fitness thing although there are even fitness coaches at the mastermind.
You need to hook up with those guys at the starting line. They do a good job for people who are super actively traveling all the time. When I go speak at investor events, I usually try to record them, and I do a good job of educating people on how it works. Those videos that I make at the different events are available for people free of charge to watch and see if what I’m saying makes sense to them.
In order to get access to those videos, they’re at my website, which is BulletproofWealth.Info. All you have to do is put in your name and email address. It will take you right to this video page, where you can get a good flavor of what’s going on. It has a video component too, but it’s difficult on a podcast to show a bunch of slides, get into numbers, and show examples. I do all of that on my video page.
From there, if you like what you see and you want to talk to me personally about what it could do, you could push a button inside that video page to book and schedule a call with me. I will go through your personal financial situation and show you what’s possible. Even at that point, you don’t have to move forward if it doesn’t make sense, but I try to educate people to help them to know exactly what’s going on and how this can work for them.
Are you on most of the major social media platforms?
No TikTok yet?
No TikTok. That’s a kid’s thing. I probably shouldn’t say anything like that. I know that all these things have their place and their different environment, but the people that I’m working with, Facebook and LinkedIn pretty much hit the majority.
Do you have any closing thoughts, tips, or one piece of advice to people about your business?
It’s one of those things where I know that most people have never heard much about what I’m talking about at all. The biggest thing that I have heard as a reaction is, “If this is so good, why hasn’t somebody else told me about it? Why have I never heard about it before?” There’s a lot of stuff out there that you have to dig in order to find. It doesn’t mean it doesn’t work. It doesn’t mean it’s not great. It means that it’s not mainstream. That’s all it means.
The people that we’re working with, probably both of us, are in the top 5% or so income earners. They are not going to hear about this stuff through normal mainstream channels. Just because you haven’t heard about it before, don’t just throw out the concept. Do a little bit of research on your own. I would say one cautionary thing is, “Do not go to YouTube, Google, and YouTube infinite banking.” You are going to get every crazy person in the world out there with diverging views that are going to confuse you. That’s why I have created my own video content library to help weed through all the noise and make it easy to understand.
I encourage everyone. I have known Tom personally for a while. Your reputation is stellar. We’re on the same page and on both the alternative investment side. Everything you’re about crafting a product. That’s a perfect fit for active alternative investors. Thank you so much for taking the time to be on the show. I encourage everyone to go to your website, BulletproofWealth.Info. As the episode comes out, we’ll certainly send an email and make sure that all your info is available for our audience because it’s a complimentary audience.
Thank you for having me. I enjoyed being on your show, and I appreciate the opportunity.
I look forward to seeing you at an upcoming event. Thanks, everyone. I hope you enjoyed reading this episode. Please follow us on your iTunes, Spotify, your podcast app of choice, or subscribe on YouTube. Thanks again. We’ll see you in the next episode.