15d • General discussion
How Should you feed the machine?
We've been using IBC for about three years, and there's one question I've never felt completely settled on.
When you take a policy loan, what is the best repayment strategy?
Our policy has a $25,000 PUA contribution limit each year, with a dollar-for-dollar rollover. If we don't contribute the full $25,000 this year, the unused amount rolls over to next year.
Right now, we're using policy loans to cover our real estate taxes, property insurance, and income taxes.
So here's my question:
If we have extra cash, should our priority be to:
- Max out the PUA each year (up to the $25,000 annual limit), or
- Put every extra dollar toward repaying policy loans?
Our cash value is earning about 6%, while our policy loan interest rate is around 3%.
I'm sure there are other factors to consider, but I'm curious how those of you with more experience think about this tradeoff. Any guidance would be appreciated.
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How Should you feed the machine?
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