How to fund a college education

Alsky · 06-27-2007, 11:28 AM

I searched google and amazon for the book "How to Pay for College Without Going Broke by Kal Chaney" you recommended... not listed on either search engine... however, there were a multitude of similar named books. I am sure each one has a different take on the original question I proposed.

If you read my other posts on this thread, this is the GRANDPARENT of the child not the parent. She is adequately insured with life insurance since I am her broker. I started this thread to get feedback from fellow professionals on this forum for other ideas and input.

Thanks anyway...

Al

Alsky · 06-27-2007, 11:32 AM

djs, thanks... best answer so far.

One more question, has anyone used annuities with a predetermined walk a way for this purpose?

salpro22 · 06-27-2007, 11:42 AM

Quote:

Originally Posted by Alsky

I searched google and amazon for the book "How to Pay for College Without Going Broke by Kal Chaney" you recommended... not listed on either search engine... however, there were a multitude of similar named books. I am sure each one has a different take on the original question I proposed.

If you read my other posts on this thread, this is the GRANDPARENT of the child not the parent. She is adequately insured with life insurance since I am her broker. I started this thread to get feedback from fellow professionals on this forum for other ideas and input.

Thanks anyway...

Al

Enjoy

http://www.amazon.com/gp/product/037...DD66A GU67XH4

Alsky · 06-27-2007, 11:58 AM

Thank you...

Al

CHUMPS FROM OXFORD · 06-28-2007, 02:02 AM

Quote:

Originally Posted by Alsky

Whats so strange about not considering commission over my clients best interests? Perhaps you read something in my statement that was not intended.

Al

I guess the "even though" threw me for a loop. But as you said, maybe I misread it.

And to all:

But please...do NOT buy a WL policy to fund college. It's an insurance policy, not a short-term investment.

Mr. Bill · 06-28-2007, 07:34 AM

Hey Al, I stand by my post. You still need to look at the parent's financial picture and whether or not they have enough life insurance on them, otherwise there's risk that grandma/grandpa may be raisin some yunguns.

Looks like Princeton Review took Kal Chaney's name off the cover (and left Bill Clinton on - go figure!)

Thanks Salpro for providing the link!

WBunch · 06-28-2007, 10:34 AM

Quote:

Originally Posted by Alsky

djs, thanks... best answer so far.

One more question, has anyone used annuities with a predetermined walk a way for this purpose?

Well from a tax standpoint the annuity option would not make sense. I have used in many cases with clients WL or VUL to fund a childs education. It really only works when the children are really young or they have to really fork over the cash. Over a 10-15yr period of over funding to the max guidelines they have a pretty hefty cash value to help fund their childrens education. Nothing wrong with using life insurance...Its not cosidered an asset on the FASFA forms if need some aid in the future..

LGilmore · 06-28-2007, 06:47 PM

"But please...do NOT buy a WL policy to fund college. It's an insurance policy, not a short-term investment"

If you only have a short term (less than 5 years) and can't survive a market cycle anyway, a CD works as good as anything or a moneymkt account.

It is all going to depend on how much lead time you have and how much you fund. Yes, whole life is an EXCELLENT choice IF you have time to let it work. I'm hoping that's what you meant. It also avoids FAFSA requirements so it works pretty good. I know I have college aged kids...

CHUMPS FROM OXFORD · 06-28-2007, 07:38 PM

I would not say that Whole Life Insurance is an excellent investment. I have never said that in 27 years in the business and probaly never will.

LGilmore · 06-28-2007, 11:59 PM

"I would not say that Whole Life Insurance is an excellent investment. I have never said that in 27 years in the business and probaly never will."

Well that would be your loss, wouldn't it? Do you feel annuities are a bad choice as well?

Do you sell Bonds? All a whole life basically is is a secure bond fund with a death benefit. The good ones, don't go backwards, you can't lose what you've gained, plus how an investment is viewed by uncle bucks is important too.

All I know from my 20 years is that they work for me. It an investment I don't have to worry about compared to others and is a part of my balanced portfoilio. Is it the only thing I do? no. but it is one of the safest ones I have. The last five years the market hasn't been too kind to my equities, kinda nice to see something plugging along that hasn't lost 10-15% during a market cycle.

James · 06-29-2007, 12:41 AM

While WL is not the ultimate investment it is one of the major ones and should be in everyones portfolio to one degree or another. Most FP'ers or nearly all I talk to would agree with that statement, may they be a CFP or ChFC what have you. Yet, it is important to pick a good one, such as the major Mutuals as they tend to be the cheapest in the long run.

CHUMPS FROM OXFORD · 06-29-2007, 01:36 AM

Quote:

Originally Posted by LGilmore

"I would not say that Whole Life Insurance is an excellent investment. I have never said that in 27 years in the business and probably never will."

Well that would be your loss, wouldn't it? Do you feel annuities are a bad choice as well?

Who said whole life insurance was a "bad" choice? I said it is NOT an excellent investment. And it isn't.

Do you sell Bonds? All a whole life basically is is a secure bond fund with a death benefit. The good ones, don't go backwards, you can't lose what you've gained, plus how an investment is viewed by uncle bucks is important too.

I sure hope they don't go backwards.

All I know from my 20 years is that they work for me. It an investment I don't have to worry about compared to others and is a part of my balanced portfolio. Is it the only thing I do? no. but it is one of the safest ones I have. The last five years the market hasn't been too kind to my equities, kinda nice to see something plugging along that hasn't lost 10-15% during a market cycle.

I agree that they are safe. But getting back to the original topic...I never use them for college funding.

And sorry...but the notion that a whole life policy is an "excellent investment" is quite harebrained. It is an insurance policy that can generate a competitive rate of return (long-term). I have no problem recommending them to clients, but it is always considered as a separate entity when evaluating one's investment portfolio. If a significant amount of cash is removed from the policy, it obviously affects the death benefit quite a bit.

Or...put another way...if someone stops by my office and says they would like to invest some money...whole life insurance is at the bottom of my list...unless a financial analysis dictates that it makes sense.

Nm

LGilmore · 06-29-2007, 03:41 AM

"I agree that they are safe. But getting back to the original topic...I never use them for college funding. "

Have you experienced FASFA?

Remember it's the old saying it's not what you make, it's what you keep. Modified slightly to include.. what you have to declare as well.

An advantage to cash value is they don't increase your EFC like a 529 and other investments. As I said, just did it, works pretty good. Especially since our investments stalled or decreased over the past few years when we needed the funds to perform. the nice 5-7% from the life return didn't hurt, when the market when backwards. It felt better when I didn't have to tell the government or the schools what the values were so they could calculate what we should pay. It's still not what you make, it's what you get to keep. I guess we just have a different perspective and experiences. For us it worked OK.

CHUMPS FROM OXFORD · 06-29-2007, 06:49 AM

If the market is moving backwards, then I'll reluctantly agree that (in retrospect) the WL option is a good option. But over most (if not all) 10-15 year periods, the market has not moved backwards.

As for our experiences, our kids aren't in college yet, so you have the experience edge there. I'm using the 529 option. Of course, two athletic schollies would take care of everything.

RolloverCoach · 06-29-2007, 01:23 PM

The 529 plan is a NO brainer for younger families considering they can stomach the fluxuation of mutual funds.

If not, look at the pre-paid tuition plans...

LGilmore · 06-29-2007, 02:20 PM

"As for our experiences, our kids aren't in college yet, so you have the experience edge there. I'm using the 529 option. Of course, two athletic schollies would take care of everything."

Try the nation merit route, we picked up about a quarter mil for both and if either blows a knee, they still keep the money. They just need to do their homework.

The tough part about the savings aspect is the FASFA, Unless you're willing to pay full price, every college wants you to take it. From that, grants, staford loans (subs and unsubbed) and work study are calculated.
The hard part about the 529's and other savings choices, is just when your patting yourself on the back for doing them and getting solid returns, the expected family contribution jumps up and takes away work study, staford and any grants. It's like the colleges say thank you for saving so well, make the check out to....

The FASFA in essence does punish those who save via declarable methods vs. methods they don't ask about.

And yes, wl works best if you've had it a long while, in our case before kids. I agree about market cycles and their impact on investment.

I tend to run into two types of client college planners, those from birth and those whose kids are juniors in HS. Ants and grasshoppers. With those who have time, we look at several options and the net effect. Those without, we look at what they have done sofar or scale back plans to a state school.

It's getting harder and harder for kids to do college without loans anyway. Private tuition, R&B is running about 40-45k, and state schools are pushing 25-30k. Med school for my S, is going to run 65k a year. The reality we have to face is college costs are rising much faster than anybody's investment portfoilio. So while it may not be fancy or flashy something like a wl could appeal because it isn't a strike against you when they tally up assets.

Idea · 12-04-2008, 11:16 PM

I noticed no one recommended an UTMA account or UGMA (depending on your location).

Grandma can put an amount of money in an UTMA and retains custodial control... it can be used for anything as long as it is for the benefit of the child.

It is not tax deferred or tax free - however, it does enjoy a bit of favorable tax treatment.

The underlying vehicle can be equities or CD's or a money market...

If the child doesn't go to school Grandma can still spend the money for the child's benefit, clothes, car, etc

Grandma can still take advantage of a gift... $11k this year i think... or Grandma could gift that much every year leading up to and through college if Grandma has the money to spare...

I don't know a whole lot about FSFA - but doesn't parents income limit the bene's a child can receive? So, if you can afford to 'fully fund' a cash value policy then you must be making decent coin - maybe enough to impair your ability to qualify anyway...

Someone said: "Yes, whole life is an EXCELLENT choice IF you have time to let it work" yes - because you need all the time to overcome the negative return or even to get to break even when you consider a straight investment...

Cash Value is always a poor choice for investing... IMO...

Hope this helps Al...

Idea