TGCI 23: Ask Pancham? #2

Top 6 Reasons To Invest Outside of Wall Street
Download this free e-book to find out why it's critical to your financial success and what the alternatives are.

I have read and agreed to your Privacy Policy

TGCI 23 – Ask Pancham? #2

Show #23 - Episode Art - Pancham (2)


Today, we are back with another Ask Pancham Show. Today’s question is about Gold Collar Banking. Can we consider Gold Collar Banking to be an investment?

Great question. Pancham explains why Gold Collar Banking can be considered as an investment for some, and not for others. Then, he proceeds to explain this investment strategy by using easy to understand scenarios. Pancham explains why you should consider borrowing against your money for making investments or purchases. Listeners will learn how they can leverage the power of compound interest. 

Towards the end, we list SIX benefits of this financial strategy. Topics discussed include making your money work in multiple places, saving tax dollars, availing creditor protection, and much, much more. Tune in for some excellent insights!

Pancham Gupta
Show #23 - Quote - PANCHAM (2)

Timestamped Shownotes:

  • 01:05 – Question of the Day: I am thinking about doing Gold Collar Banking. How do you look at this? Is this an investment?
  • 01:30 – What are your goals and objectives as an investor?
  • 01:53 – Which people will consider Gold Collar Banking as an investment?
  • 02:37 – Buying in cash vs. Getting a Loan – Which is the better option for you?
  • 03:40 – Pancham explains why it is better to borrow money against your policy
  • 04:23 – Learn how the power of compound interest can help your earn higher returns
  • 05:05 – Pancham cites some simple examples to explain the difference between compound interest and simple interest
  • 08:58 – The multiple benefits of borrowing and investing in Gold Collar Banking
  • 10:47 – Pancham explains how your money is creditor protected when you utilize this investment strategy
  • 11:42 – What are the benefits of this investment strategy in case you are diagnosed with illness or disability?

3 Key Points:

  1. How to leverage the power of compounding to earn higher returns
  2. How to protect your money against creditors
  3. How to make your money work in multiple places


Get in Touch:

Read Full Transcript

Welcome to the Gold Collar Investor podcast with your host Pancham Gupta. This podcast is dedicated to helping the high paid professionals to break out of the Wall Street investments and create multiple income streams.

Here’s your host Pancham Gupta.

This is a special show where I will be discussing questions from the listeners which can benefit much wider audience.

I’m going to do this once every four to six weeks depending on the flow of questions. Before we get into the show, I would like to remind you that you can get access to my free report on the top six reasons why you should diversify out of Wall Street investments. You can directly go to the website, and download it for free. I repeat and download it for free.

Q: So here’s the Question. I am thinking about doing Gold Collar Investor Banking. How do you look at this? Is this an investment? 

This is a great question. First of all, I would like to congratulate you for considering the Gold Collar Investor Banking. For people who are new to this concept, I would encourage you to listen to the show name Magic Bank Account, different angle on life insurance. It was show number five. 

Let me give you a short answer first. 

The answer is, it depends. I know you don’t like this answer, but it really depends on the goals and objectives of the person doing it. I personally, which I think the question was, do not look at the Gold Collar Investor banking as an investment. 

However, this can be seen as an investment for a person who is keeping money in his bank account and doing nothing with it. That person may have his reasons for keeping the money in his bank. But for him, this can be viewed as an investment. He is going to be making approximately 5% or more here at Gold Collar investor banking…that too compounded, tax free versus zero dollars in his bank account. I would say it’s an investment for him. Now the long answer to understand this concept of banking, that too Gold collar Investor Banking is that first you have to realize that every time you’re buying something, whether using all cash, in which case you’re losing interest on that money, or by borrowing money, in which case you’re paying interest to someone. So regardless of what you do, you are losing on the interest. 

Yes, the interest difference between your ability to use that cash versus what your borrowing interest rate will be. If you were to borrow the money, if you bought it all cash versus you keep that money in the bank account at zero percent interest rate. Then sure, you are no worse or no better. However, you have to consider the opportunity cost of capital. You could have invested that money at a higher rate. Now, in the case of Gold Collar investor banking, this account helps you avoid the above situation. If you want to buy something all cash, you can borrow against this bank account and use that money to buy it. This way the money in your gold collar investor bank is still compounding, tax-free. In other words, you are keeping that growth. Yes, you are paying simple interest on that borrowed money, but the amount of interest that you pay on this money almost cancels out with the interest you are making on your money in the Gold Collar Investor bank. 

If you understand this part, then you will be able to see the power of compound interest. The power will manifest it says after you keep doing this multiple times. You would have started a machine that is working very hard for you. After four to five years, the compound interest amount will be so high that it will make the simple interest on the borrowed money look tiny. Overall, you will come out much more positive. 

Let me give you an example to make it more clear. I’m going to assume certain numbers for the sake of the success. And by no means it’s an illustration of actual numbers. Let’s say you have hundred thousand dollars in this bank account, which is the cash value of your policy earning 5%. Now, let’s say that your family has grown and you want to buy a SUV that is worth $50,000. You get the SUV, all-cash by taking loan against the policy, assuming that this loan is coming out at 5.25% against the policy. I am using a spread of 0.25% but it will vary from company to company and time to time. So in effect, you are paying 5.25% simple interest on $50,000. At this point, your hundred thousand dollars are growing at a compound interest of 5% without any disruption. And you’re paying 5.25% of simple interest on 50,000 that you borrowed. I hope you are with me so far. Right? If not, I would urge you to listen to that part again. 

Okay, in the year one, the compound interest of 5% is the same as the simple interest as in the beginning….the starting number is the same, which is hundred thousand dollars. Now assume that five years go by and you have paid off the $50,000 loan that you took against this policy. Since your money was growing at compound interest. Your hundred thousand dollars have actually become $127,628 give or take. Compare this to 5% simple interest. 5% simple interest will be $5,000 on hundred thousand dollars. In five years, it will be $125,000 in an account. So it’s only $2,628 difference between the compound interest and the simple interest over last five years. You may be like, Pancham. What is such a big deal? It’s only $628 extra. You would be correct if you are able to achieve this with any account even if it is paying just simple interest tax-free. Now let’s do this again. Assume that you have outgrown your five-seater SUV and you want a seven-seater. You decided to buy that car for $70,000 all-cash. You borrow that money at 5.25% simple interest against your policy. Now, your policy is earning interest tax-free. On the whole $127,628. Whereas you are paying simple interest on the $70,000 you borrowed. 

Do you see the difference? Right here I have assumed that over the last five years, you have not put even a single dollar in your account. With this example, I just want to point out the fact that your money is growing untouched at a compound interest, tax-free and you can use that money any which way you want. And after a few years, you will be borrowing money against it but still coming out positive as compared to if you were to do the same thing using the regular bank account. 

Okay, I’m still not done yet. The most powerful part of this strategy comes from investing that borrowed money for much higher returns than the interest you’re paying for it. For example, let’s say that you want to invest hundred thousand dollars in an investment that is producing 8% annually. What if you borrow that hundred thousand dollars against your Gold Collar Investor bank and pay 5.25% on it and invest it for 8%. Now, with this, you have created a supercharged machine which is making your money work for you in two different places. With this strategy, there are three separate things that are happening. Your $100K in the Gold Collar investor bank is growing at compound interest untouched and tax-free. Second, the hundred thousand investment you did is generating 8% for you. Third, you’re paying 5.25% on that $100K borrowed money back to the insurance company. Isn’t that powerful? So for me, it’s a magic savings account with the multiple benefits. Those benefits are summarized as follows. 

  1. Being able to leverage the power of compound interest in the real world. 
  2. Ability to have your money work for you in two different places. 
  3. Tax free growth 
  4. Its creditor protected depending on the state where you live in. 

That means that if you get sued and the judgment comes against you, they cannot go after this money, the reasoning behind this is that since that money is not yours, it’s for your beneficiaries. Creditors cannot really come after them. However, if you were to take loan against this policy and use that for your own benefits, then in some states that money is not protected as it’s being used by you for your own benefit. I think that’s for all states or in some states will have to check that. But yeah, that’s that benefit.

  1. Provides you with life insurance benefit, if something were to happen to you. 
  2. Ability to add disability or illness riders are options for your retirement years. 

So if you were to get l or disabled, you can take some of your insurance proceeds and use that to your benefit while you’re still alive. So you can see why I am a big fan of Gold Collar Investor banking. 

For me, the first three reasons are the real, real reasons why I like to do this – that is being able to leverage the power of compound interest paying, having your money work in two different places and the tax free growth. The last three benefits are the cherry on the cake. And the last two are like cherry on the top of cherry, which is, you know, having the life insurance benefit and the disability and illness riders. So really, I don’t see any reason for people who are making so high salaries, to put some of the money into these accounts and get all of those benefits that talked about. It’s just no brainer to me. So here you go. I hope it answers your question. Please note that in order to keep it simple, I have not taken into account the initial cost of policy for this illustration. 

If you were to take that into account, you will get to the breakeven point in year four or year five, but the overall principles still apply. Please do reach out if it is still unclear. I know it’s a difficult concept to grasp. If you are interested in opening one, you can go to or and request a consultation.

Thanks for listening.

Show #23 - Episode Art - Pancham (2)

Leave a Reply

Your email address will not be published. Required fields are marked *