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I didn't respond earlier but want to contribute so that I'm part of your thank you.
You're welcome.
Rick
IUL Vs. 529 - Opinions?
- Thread starter 2112Greg
- Start date
I didn't respond earlier but want to contribute so that I'm part of your thank you.
You're welcome.
Rick
- 10,323
Its mainly for the flexibility Larry.
Usually, college funding is on top of usual insurance premiums and retirement contributions; so college funding contributions are usually the first thing to go in the case of financial hardship.
If they cant make the premium on the WL then it lapses, if they cant make the premium on the UL they have some flexibility (most likely can make a very minimal payment or just wait until the next year).
Yes, I realize that a max funded WL will have some flexibility in premiums if need be, but not nearly as much as a UL.
One of the main selling points that stock jocks will use for 529s against PI is that the 529 has a flexible payment schedule. This helps eliminate that concern/objection.
I also realize that a WL will usually perform better at younger ages vs. a UL, but in the first 18 years its usually fairly negligible.
And on that note, I am a big believer in putting the insurance on the parent instead of the child.
If the parent isnt around, then future premiums will be in question (yes I realize that the parent has to have sufficient coverage in order to insure the child, but there still could be ambiguity); if the DB is on the deceased parent, the child will have more than the projected CV for college, so there will be less of an issue at that point.
- 7,790
I dunno. You tell me.
I dunno either. That's why I help my clients find more efficient ways to pay for college.
- Thread starter
- #26
- 795
Which is/are what?
- 1,271
The two are incomparable. Most middle class prioritizes their savings into college fund, retirement then permanent life insurance. I would talk about re-prioritizing their savings into life insurance, retirement then college fund then talk about how the loan from the insurance company can help with retirement and college funding if the need arises. Without the strong desire for the permanent life insurance, the client will call after the first year and complain about the lack of CV (and lapse).
In regards to the type of insurance, I don't know of any policy that accumulates CV as quickly as lifetime pay WL with "maximum" level PUA rider (and I have sold tons of IUL). You'd get paid less of course but then nothing's for free. JMO
We must not be doing it the same way. I use a 60/40 split of base premium to PUA Rider. So, at the end of the first year my guy has enough cash value to cover 4 to 5 months of premium through APL (automatic premium loan). At the end of the 2nd year he has almost a whole year of APL ability. So, a WL doesn't just lapse if a premium is missed... at least not the way I do it. I could get greedy and use a near-MEC PU@65 with all base premiums and it works almost the same.
If my guy runs into a cash flow hardship, he can cut his premiums by up to 40% (PUA rider) and keep his base contract. That's pretty flexible.
But a bigger issue for me is that I don't talk to clients and prospects about using PLI to deposit money into and then at some point in the future we'll blow open the vault door and clear out the money for some special purpose. I'm showing them how to use their PLI as a "garage" for their money (take your money for a drive, put it back when you're done, take it out again, put it back, etc). The real rate of return on the policy isn't the cash value, but ACCESS to the cash value with no strings attached for whatever he needs it for (Disney Story, JC Penney, etc).
I agree about the parent needing to be the insured.
Let me ask you about EIUL. Does it work like indexed annuities in that you must put the money in the policy and leave it in there for a specified period of time or it doesn't get the index rate but rather a smaller guaranteed rate?
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Dang, I'll agree, one helluva thread.
So here's a scenario: Grandma & Grandpa want to set up Sally (7 yrs) and Bobby (10 yrs) for college. After being shown their options, they choose to take out Whole Life policies for both kids' college. You set it up at 60/40 premium/PUA. Questions:
1. Who owns the policy?
2. Who are the beneficiaries?
3. What company takes children on a whole life plan, or is this written on someone else?
4. I assume dividends are accessed first, right? Then what are the tax ramifications after that?
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So here's a scenario: Grandma & Grandpa want to set up Sally (7 yrs) and Bobby (10 yrs) for college. After being shown their options, they choose to take out Whole Life policies for both kids' college. You set it up at 60/40 premium/PUA. Questions:
1. Who owns the policy?
2. Who are the beneficiaries?
3. What company takes children on a whole life plan, or is this written on someone else?
4. I assume dividends are accessed first, right? Then what are the tax ramifications after that?
.
- 15,041
Either parents or grandparents. Depends on the preference of the grandparents.
The owner. Forgot the name of the triangle, but insured, owner and beneficiary cannot all be different.
What company doesn't take children?
It depends, generally you surrender down to basis and then borrow the rest. But if you want to do like Larry, you are better off borrowing from the beginning, that way you can pay it all back and have a larger cash value for the next time you need money.
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