"Buy Term and Invest the Difference"
The most popular objection to whole life — and why it misses the point of controlling the banking function.
From Becoming Your Own Banker, Chapters 5, 16
"Buy term and invest the difference" is perhaps the most repeated piece of financial advice in America. Buy cheap term insurance for death benefit, invest the premium savings in mutual funds. On paper, the math can look compelling — if you assume consistently high returns and perfect investor discipline.
Nash challenged this on several fronts. First, it ignores the banking function entirely. Term insurance provides no cash value, no borrowing capability, and no mechanism for recapturing interest on life's major purchases.
Second, the strategy assumes people will actually invest the difference — consistently, for decades, without interruption. In practice, Parkinson's Law tends to consume the "difference" long before it reaches a brokerage account.
Third, term insurance expires. If you need coverage at 65 or 70, renewal rates are often prohibitive — if available at all. Whole life is permanent. The death benefit is there whether you die at 50 or 95.
Most fundamentally, "buy term and invest the difference" is an investment strategy. IBC is a banking strategy. They're not competing answers to the same question — they're answers to different questions entirely. You can practice IBC and still invest.