Lost opportunity cost is the future growth a dollar can no longer earn once it leaves your control through taxes, interest, or spending. On a $90,000 household income rising 4% a year for 35 years, roughly $6.6 million passes through your hands, and every dollar lost early costs you its compounding for decades.
Most financial advice aims at the rate of return. Pick better funds, take more risk, find a higher yield. The conversation almost never starts with the capital that leaves a household before it has a chance to earn anything at all, and for most families that leak dwarfs any difference a better fund could make.
The calculation that reframed this for me came from a video with only a few thousand views. I was in the process of taking over a bank's investment department, worried that I knew very little about money, when I found a Truth Concepts video of Todd Langford walking through the max potential calculator. The original video is no longer easy to find, so this post rebuilds its math rather than embedding it. I watched it five to ten times in my first years in this business. I later became friends with Todd, use Truth Concepts software, and have attended several of its trainings.
Every dollar you lose to taxes, interest, or unnecessary spending costs you twice: once when it leaves, and again every year it is not compounding for you. That single idea is lost opportunity cost, and it sits underneath everything we build at BetterWealth, including The And Asset, the framework we have used across more than 2,000 policies.
This piece rebuilds the max potential walk-through step by step: how much money actually passes through a household, what taxes and debt service really remove, why risk is the wrong first lever, and how The And Asset applies the lesson without overselling whole life insurance as the answer for everyone.
- A $90,000 household income with 4% annual raises passes roughly $6.6 million through its hands over 35 years.
- At 4% inflation, the final year's income must reach about $341,000 to buy what $90,000 buys today.
- In the illustration, $2.3 million of lifetime taxes removed more than $5 million of future value, because taxed dollars stop compounding.
- Keeping capital by reducing taxes, interest, and waste usually moves wealth more than chasing higher investment returns.
- The And Asset only deploys borrowed policy capital into activities whose return beats the carrier's loan cost.
01 / The ProblemHow Much Money Actually Passes Through Your Hands?
Far more than most families assume. Todd's illustration starts with a household earning a combined $90,000 a year and a 35-year window, with no existing assets. At zero growth and zero raises, that is $90,000 multiplied by 35: about $3.15 million flowing through one family's accounts.
Now add reality. If prices rise 4% a year and the family spends everything it earns, its income has to rise at least 4% a year just to keep eating the same way. Run the same 35 years with 4% raises and lifetime income climbs to roughly $6.6 million. The final year's paycheck alone is about $341,000.
That $341,000 buys what $90,000 buys today. Nothing more. Inflation turns a middle-income household into one that looks wealthy on paper while its standard of living stays flat. Federal income tax brackets adjust for inflation, but some thresholds do not: the 3.8% net investment income tax, the Additional Medicare Tax, and the income levels at which Social Security benefits become taxable. As nominal income rises over a career, more of it crosses those fixed lines, which pushes the all-in tax load in the next section higher over time.
Your ability to work is your largest asset.
Most people never price it. Todd's point is that the earning power of a household over a career is a multi-million-dollar stream, and the real question is how much of it the family keeps working. A calculator like this is only as good as its inputs, so treat these figures as an illustration of the mechanics, not a forecast of your life.
02 / The MechanicsWhy Does Every Lost Dollar Cost You Twice?
Because a dollar that leaves early stops earning for the rest of the period. The first cost is the dollar itself. The second is everything that dollar would have grown into had it stayed invested for the remaining years, and on a long horizon the second cost is usually the larger one.
Taxes
In the illustration, Todd sets the total tax load at 35% of income. That figure is meant to capture everything: federal, state, and local income tax, sales tax, and the stack of smaller taxes on phones, hotels, and gasoline. On $6.6 million of lifetime income, that is about $2.3 million paid.
The calculator then shows the real damage. Because each taxed dollar stops compounding the year it is paid, the loss to the household's max potential comes to more than $5 million. The illustration does not print its growth rate, but its own figures imply roughly 5% a year: in all three categories, lost future value runs about 2.2 times the dollars paid. You wrote checks for $2.3 million. Your future balance sheet is short by more than twice that.
Taxes cost twice. So does everything else.
Debt Service
Todd's illustration then applies 34.5% of income to servicing debt, the debt-service share he enters in the calculator. That removes roughly another $2.3 million in payments and about $5.1 million of future value. Some of that debt builds equity, such as mortgage principal on a home that holds its value. The interest portion does not. It goes to an outside lender and never comes back to compound for you.
Lifestyle
Finally, lifestyle spending set at 28.5% removes about $1.9 million in expenses and roughly $4.2 million of future potential. Add the three shares together and 98% of lifetime income is gone. What remains is about 2%, which works out to about a year and a half of the family's starting income after a 35-year career.
The average family does not have a return problem. It has a retention problem. You cannot compound money that already left.
03 / The FrameworkWhat Does Lost Opportunity Cost Have to Do With Infinite Banking?
Lost opportunity cost is the reason infinite banking exists. Nelson Nash, the pioneer of using whole life insurance as a personal banking system, framed the choice plainly: you either lose money paying interest to outside lenders, or you lose money through the opportunity cost of paying cash and giving up that capital's growth. His answer was to hold capital in a vehicle that keeps compounding while you borrow against it. We respect that foundation and credit it every time.
The And Asset shares roots with IBC but operates on different principles, and the max potential exercise shows exactly where they diverge.
Where IBC Ends and The And Asset Begins
IBC says you can run nearly every purchase through your policy and become your own banker for all of it. The And Asset says you only borrow against the policy when the borrowed dollars go into an activity that returns more than the carrier's loan cost, because a loan used for consumption does not recover any lost opportunity cost. It just moves the leak from an outside lender to the insurance company.
Many IBC marketers also say you are paying yourself interest. You are not. The interest on a policy loan goes to the carrier. Your return is what the deployed capital earns elsewhere while the policy keeps compounding, net of mortality and expense charges. Marketers have ruined the way this should be explained, and the max potential math is the cleanest way to see why the correction matters.
The math has to work. Every time.
Whole life insurance is not the destination. It is the capital base. The value is created in what you deploy that capital into.
04 / How It WorksHow to Run a Max Potential Analysis on Your Own Income
A max potential analysis is a short exercise with a spreadsheet or Truth Concepts, and it works in five steps. The goal is to rank your leaks by the future value they cost, not by the dollars they cost today.
- Total the dollars that will pass through your hands. Multiply current household income by your remaining working years, then rerun it with annual raises that match inflation. The second figure is your lifetime income.
- Subtract taxes and count the lost growth. Apply your all-in tax load as a share of income. Record both the dollars paid and the growth those dollars would have earned had they stayed invested.
- Subtract debt service and count the lost growth. Apply the share of income going to outside debt. Separate interest from principal that builds equity, and record the future value the interest removes.
- Subtract lifestyle spending. Apply your lifestyle share. What remains is the capital that actually stays with you and compounds.
- Target the largest leak first. Rank the leaks by lost future value. Work on the largest, and only deploy borrowed capital into activities whose return clears the cost of borrowing.
The result is rarely comfortable. For the entrepreneurs and high-income earners we work with, the largest leak is usually taxes or interest paid to outside lenders, and the second is capital parked where it earns less than it costs. Tax planning belongs with a qualified CPA; the rules are specific to your situation and change over time.
The And Asset Fits a Specific Person Doing Specific Things
It Fits You If
- You already deploy capital into a business, real estate, or deals
- You can name a use for capital that beats the loan cost
- You have a 10+ year horizon and consistent cash flow
- You want more control over when and how you access capital
It Does Not Fit You If
- You are carrying high-interest consumer debt
- You want a savings account alternative
- You need the cash back within a few years
- You cannot identify a productive use for borrowed dollars
If you are in the first column, a 30-minute conversation will tell you whether a policy belongs in your capital structure. If you are in the second, we will tell you that too. No pressure, no pitch.
Book a Discovery Call05 / The MathDoes the Deployed Return Clear the Loan Cost?
It must, or you should not borrow. This is the entire test of The And Asset. Policy loan rates vary by carrier and rate environment; at the time of writing many carriers fall in the 5 to 6% range, but treat any specific number as a variable to verify with the carrier, not a constant.
Here is the structure. You borrow against the policy at the carrier's loan rate. The policy keeps compounding on its cash value, net of mortality and expense charges, subject to how the carrier treats loaned values. The capital you deploy earns its own return. If that return beats the loan cost, the same dollar has done two jobs. If it does not, you have borrowed money to lose money slowly.
Tie this back to Todd's calculator. A dollar sent to an outside lender as interest leaves the household for good. A dollar deployed from a policy into an activity that out-earns the loan cost keeps the policy's compounding intact and adds a second return on top. That is the AND.
If the deal does not clear the loan rate, do not borrow.
06 / Where People Get It WrongIs More Investment Risk the Answer?
Usually not first. Conventional advice says to take on more risk for higher returns, but risk is simply a higher likelihood of loss. A 100% return on zero dollars is still zero. A household that keeps 2% of its lifetime income has very little for any return to act on.
Returns matter. They matter less than the base they act on. For most families the larger gains come from better saving and spending decisions: keeping more of each dollar through legitimate tax planning and tax-advantaged structures, cutting interest paid to outside lenders, and holding a lifestyle that leaves capital to compound.
The whole life industry gets this wrong in the opposite direction. Some agents present a policy as the fix for every leak on Todd's chart. It is not. A properly structured policy does not reduce your income taxes today, does not erase existing high-interest debt, and does not break even in the early years. Cash value does not catch cumulative premiums until around year five for a healthy insured. Anyone showing you a year-one or year-two break-even is showing you marketing.
This is not for everyone. If you cannot identify a use for borrowed capital that beats the loan cost, do not borrow, and possibly do not buy the policy.
The Frameworks Behind 2,000+ Policies, in One Place
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Open the Vault07 / The TradeoffsBenefits and Real Tradeoffs of Keeping Capital in a Policy
The benefit is uninterrupted compounding on capital you can still use; the tradeoffs are time, cost, and discipline. Both belong in the same conversation.
On the benefit side, a properly structured whole life policy keeps compounding on its cash value while you borrow against it, gives you control over repayment terms, and policy loans are generally not taxable income while the policy stays in force and is not a modified endowment contract under IRC Section 7702A. That control is what a HELOC cannot guarantee, since a lender can freeze or reduce a credit line.
On the tradeoff side, the early years are expensive. The policy carries mortality and expense charges, and cash value trails cumulative premiums for the first several years. Loans that are never repaid reduce the death benefit and can, in the worst case, cause a lapse with tax consequences. And the discipline of repayment is the whole strategy. Without it, a policy is an expensive savings account.
Lower early. Stronger later. That is the trade.
08 / Head to HeadWhere a $10,000 Outflow Goes, and What It Costs
Compared side by side, the difference between a dollar lost and a dollar deployed comes down to one question: does it keep compounding? The table uses a single $10,000 outflow and an illustrative 6% growth rate over 20 years, where $10,000 left to compound would grow to about $32,071.
| Dimension | Paid in Tax | Interest to Outside Lender | Idle Cash | The And Asset Policy Loan |
|---|---|---|---|---|
| Today's Cost | $10,000 gone | $10,000 of interest gone | $0, but earns little | Loan interest paid to the carrier at its rate |
| Future Value Lost (20 yrs, 6% Illustrative) | About $32,071 | About $32,071 | Most of the $22,071 of growth | Policy keeps compounding, net of charges |
| Second Return | None | None | None | Deployed capital earns its own return |
| Condition to Use | Legal obligation; reduce through planning | Avoid when a better source exists | Hold only what you need for reserves | Deployed return must beat the loan cost |
Taxes and interest. Both remove the dollar and its future. In the illustration, $10,000 paid today costs the household about $32,071 by year 20. Taxes are an obligation you reduce only through legitimate planning with a qualified advisor. Interest to outside lenders is often avoidable when you have a better source of capital.
Idle cash. Cash on hand is not lost, but at a low yield it gives up most of the $22,071 of growth the illustration shows. Reserves matter. Excess reserves are a quiet leak.
Policy loan. The loan costs interest paid to the carrier, not to you. What changes is that the policy's compounding continues and the deployed capital earns a second return. That only helps when the second return beats the loan cost.
The Business Owner Who Stopped Paying an Outside Lender
This is a representative composite, not a single named client, and the figures are illustrative. Consider a 44-year-old business owner, preferred non-tobacco, funding a whole life policy at $36,000 a year: $3,600 to base premium and $32,400 to the paid-up additions rider, a 10/90 base/PUA split with a term blending rider, designed to stay under the MEC limit.
Through year four, cash value trails cumulative premiums, as a real policy should. At year five, cash value reaches roughly $181,700 against $180,000 contributed. By year seven, with about $268,300 of cash value against $252,000 contributed, the owner needs $143,700 for a piece of revenue-producing equipment that the business would otherwise finance through an outside lender.
Instead the owner borrows $143,700 against the policy. At an illustrative 6% loan cost, first-year interest runs about $8,622, paid to the carrier. The equipment adds roughly $19,974 a year of margin, a 13.9% return on the $143,700. The spread of about $11,352 in the first year stays in the business, and the policy keeps compounding on its cash value the entire time, subject to how the carrier credits loaned values, which can differ depending on whether the carrier uses direct or non-direct recognition. Repayment runs on a 47-month schedule, about $3,400 a month, paid from business cash flow, with the equipment's margin covering roughly half of it.
One dollar. Two jobs. That is the AND.
09 / The Bigger PictureHow the Max Potential Lesson Fits a Broader Capital Strategy
The max potential lesson belongs at the start of any capital strategy, not the end. Before choosing investments, a household or business owner should know which leaks cost the most future value and work on those first. A policy may or may not be part of that answer.
For the entrepreneurs, real estate investors, and high-income earners we work with, a properly structured policy often sits beside retirement accounts, a brokerage account, and the business itself. It complements those tools; it does not replace them. Its job is to hold capital that keeps compounding and stays available for opportunities that clear the loan cost.
If you are an advisor or an agent reading this and you want to do right by your clients, learn to show clients this math with real software; Truth Concepts is what I use. The underlying lessons are the same whether the answer ends up being a policy or not: keep more capital working, and never lose a dollar you did not have to lose.
An Honest 30 Minutes About Whether This Fits You
We have structured more than 2,000 policies. We have seen this strategy work exactly as designed, and we have seen it fail. On a discovery call, we look at your situation, run the numbers, and tell you honestly whether The And Asset belongs in your capital structure. If you would rather learn first, the The And Asset and BetterWealth YouTube channels go deep on the math.
Book a Discovery CallFAQLost Opportunity Cost and Max Potential Questions
What is lost opportunity cost?
Lost opportunity cost is the growth a dollar can no longer earn once it leaves your control. A dollar paid in tax, interest, or unnecessary spending is gone today, and so is everything it would have compounded into for the rest of your working life.
What is a max potential analysis?
A max potential analysis totals every dollar that will pass through your hands over a set period, then subtracts taxes, debt service, and lifestyle spending while counting the growth each outflow gives up. It shows where lifetime wealth actually leaks.
What growth rate does a max potential analysis assume?
Whatever rate you enter, and every lost-future-value figure depends on it. The Truth Concepts illustration in this post does not print its rate, but its figures imply roughly 5% a year, which makes each lost dollar worth about 2.2 times its face value over 35 years. Rerun the analysis at the rate your own capital realistically earns.
How much money passes through a $90,000 household over 35 years?
About $3.15 million with no raises, and roughly $6.6 million if income rises 4% a year to keep pace with inflation. In that second case, the final year's income is about $341,000.
Why do taxes cost more than the amount you pay?
Taxes cost you twice: once when you pay them, and again every year that dollar is not compounding. In the Truth Concepts illustration, $2.3 million of taxes paid removed more than $5 million of future value.
Is taking more investment risk the answer to building wealth?
Usually not first. Risk means a higher likelihood of loss, and a 100% return on zero dollars is still zero. The larger lever for most households is keeping more capital by reducing taxes, interest paid to outside lenders, and unnecessary spending.
What is The And Asset?
The And Asset is BetterWealth's framework for using a properly structured whole life policy as a capital base. You only borrow against it for an activity that produces a return greater than the carrier's loan cost, so your dollars do two jobs at once: the policy keeps compounding while the deployed capital earns its own return.
How is The And Asset different from infinite banking?
Infinite banking, as Nelson Nash taught it, frames a whole life policy as a personal banking system for any purchase. The And Asset shares those roots but operates on a different principle: you only deploy borrowed capital when the return clears the carrier's loan cost. The policy is the capital base, not the destination.
Do you pay yourself interest on a policy loan?
No. Many IBC marketers say you pay yourself interest, but the interest on a policy loan goes to the insurance carrier. Your return comes from what the borrowed capital earns elsewhere while the policy keeps compounding, net of mortality and expense charges.
Does whole life insurance fix lost opportunity cost?
Only for a specific person using it with discipline. A properly structured policy lets capital keep compounding while you borrow against it, but cash value does not catch cumulative premiums until about year five for a healthy insured, and borrowing only makes sense when the deployed return beats the loan cost.
What is Truth Concepts?
Truth Concepts is financial calculator software developed by Todd Langford, used by advisors to model cash flow, opportunity cost, and the long-term effect of financial decisions. Caleb Guilliams uses it and has attended multiple Truth Concepts trainings.
- Truth Concepts: the financial calculator software behind the max potential illustration, and its training workshops for advisors.
- Nelson Nash, Becoming Your Own Banker: the origin of the infinite banking concept and its case against the opportunity cost of paying cash.
- IRC Section 7702A (Cornell Law): the modified endowment contract rules that decide when policy loans stop receiving loan treatment.
- U.S. Bureau of Labor Statistics, Consumer Price Index: official inflation data for testing the inflation input in your own analysis.
- BetterWealth resources: The And Asset book, the The And Asset YouTube channel, and the BetterWealth YouTube channel.
I founded BetterWealth to treat life insurance as the capital tool it actually is, not the product most people get sold. Our team has structured more than 2,000 policies across all 50 states. I wrote The And Asset and host the BetterWealth and The And Asset YouTube channels. If you want an honest read on whether a policy fits your plan, book a discovery call. We will tell you if it does not.