Broker Check
11 June
How to Save and Pay for College Education

Description

Funding a college education with an Indexed Universal Life (IUL) insurance policy can offer several advantages. Here are some key benefits:

  1. Tax Advantages
  • Tax-Deferred Growth: The cash value within an IUL policy grows tax-deferred. This means you don't pay taxes on the interest, dividends, or capital gains until you withdraw the money.
  • Tax-Free Withdrawals: Under certain conditions, you can take out loans or withdrawals from the cash value of the policy tax-free, which can be used to pay for college expenses. As long as the policy remains in force and withdrawals are within the cost basis, these can be tax-free.
  1. Flexibility in Use of Funds
  • Unlike some college savings plans like 529 plans, which are specifically earmarked for education expenses, the funds in an IUL can be used for any purpose. If your child decides not to go to college, you can use the money for other needs or goals.
  1. Protection Against Market Downturns
  • The cash value in an IUL policy is not directly invested in the stock market. Instead, it earns interest based on a stock market index (like the S&P 500) but typically has a cap on the maximum return and a floor (often 0% or a small positive rate), which protects against market losses.
  1. No Impact on Financial Aid Eligibility
  • The cash value in a life insurance policy is generally not considered an asset in the federal financial aid calculation (FAFSA). This can be advantageous compared to other savings methods, which might reduce the amount of financial aid your child is eligible for.
  1. Death Benefit
  • An IUL policy provides a death benefit, which can serve as a financial safety net. If the policyholder (typically a parent) passes away, the death benefit can help cover the cost of education or provide financial security for the family.
  1. Potential for Higher Returns
  • Depending on the performance of the index the IUL is tied to, there is potential for higher returns compared to traditional whole life insurance policies or other conservative savings options. This can help in accumulating a significant cash value over time.
  1. Loan Options
  • Policyholders can take out loans against the cash value of the IUL. These loans are often more favorable than traditional loans, with lower interest rates and more flexible repayment options. The loans can be used to pay for college expenses and do not require credit checks.
  1. No Contribution Limits
  • Unlike 529 plans and other tax-advantaged savings plans, there are no annual contribution limits for IUL policies, allowing for potentially larger accumulations of cash value if desired.

Considerations

While there are several advantages, it's also important to consider some potential drawbacks and complexities:

  • Cost: IUL policies can be more expensive compared to other savings options due to insurance charges and fees.
  • Complexity: The structure of IUL policies can be complicated, requiring careful management and understanding of terms and conditions.
  • Funding Requirement: Consistent premium payments are required to keep the policy in force and to build sufficient cash value.

Overall, funding a college education with an IUL policy can be an effective strategy for those who understand the product's features and are able to commit to its requirements. It's advisable to work with the financial advisor who sent this to you to ensure it aligns with your overall financial plan.

 

Date and Time

June 11, 2024 - December 31, 2024

7:16a - 9:00p CST

Location

3 Minute on Demand Video

Note

The cost of a college education can vary significantly based on several factors, including the type of institution (public vs. private), residency status (in-state vs. out-of-state), and additional expenses like room and board, books, and personal expenses. Here is a detailed breakdown of these costs as of recent estimates: 1. Tuition and Fees • Public Four-Year Colleges (In-State): Average tuition and fees are approximately $10,740 per year. • Public Four-Year Colleges (Out-of-State): Average tuition and fees are about $27,560 per year. • Private Four-Year Colleges: Average tuition and fees are around $38,070 per year. • Public Two-Year Colleges: Average tuition and fees are about $3,800 per year. 2. Room and Board • Public Four-Year Colleges: Average cost for room and board is about $11,950 per year. • Private Four-Year Colleges: Average cost for room and board is approximately $13,620 per year. • Public Two-Year Colleges: Average room and board costs can vary widely, but are generally lower than four-year institutions, around $9,200 per year. 3. Books and Supplies • Average cost for books and supplies is roughly $1,240 per year, but this can vary depending on the program of study and the institution. 4. Other Expenses • Transportation and Personal Expenses: These can vary widely based on individual circumstances but are generally estimated to be around $2,710 per year for a public four-year college and $2,760 per year for a private four-year college. • Miscellaneous Expenses: These can include costs for personal items, entertainment, and other non-essential expenses, typically estimated at about $2,500 per year. 5. Total Estimated Costs per Year • Public Four-Year Colleges (In-State): Approximately $26,640 per year. • Public Four-Year Colleges (Out-of-State): Approximately $43,460 per year. • Private Four-Year Colleges: Approximately $55,690 per year. • Public Two-Year Colleges: Approximately $16,750 per year (if living off-campus with family, this can be significantly lower). 6. Four-Year Total Costs • Public Four-Year Colleges (In-State): Around $106,560 for a four-year degree. • Public Four-Year Colleges (Out-of-State): Around $173,840 for a four-year degree. • Private Four-Year Colleges: Around $222,760 for a four-year degree. • Public Two-Year Colleges: Around $33,500 for two years. Additional Considerations • Inflation: College costs have historically risen at a rate higher than general inflation, so future costs could be significantly higher than current estimates. • Financial Aid: Many students receive some form of financial aid, including grants, scholarships, and work-study programs, which can significantly reduce out-of-pocket costs. • Community Colleges: Starting at a community college and then transferring to a four-year institution can be a cost-effective strategy to reduce overall education expenses. Conclusion The cost of college education is substantial and continues to rise. It's important for families to plan ahead and consider various funding strategies, including savings plans like 529 plans, financial aid, scholarships, and alternative funding options such as Indexed Universal Life (IUL) insurance policies.

P203DT13H44M

Event Registration


Thank you!

Error processing your request. Please try again at a later time.