IUL Vs. 529 - Opinions?

[BNTRS]

Again it's not a rate of return competition, it's a keeping or loosing your wealth situation. 529 is, as Larry suggested, a matter of saving, accumulating, and then opening up the door and seeing the money go away. Life insurance is a matter of saving, accumulating, and using the money with the ability to retain the wealth your savings accomplished. A lot of savings situations are well suited for this.

 

[Larry Tew]

Again it's not a rate of return competition, it's a keeping or loosing your wealth situation. 529 is, as Larry suggested, a matter of saving, accumulating, and then opening up the door and seeing the money go away. Life insurance is a matter of saving, accumulating, and using the money with the ability to retain the wealth your savings accomplished. A lot of savings situations are well suited for this.

Exactly. The IRR on the cash value is irrelevent. The liquidity, use, and control of the cash value creates what the LEAPers refer to as ERR - EXternal Rate of Return.

For those apponted with Ohio National, you might want to log in to ONNet and watch Ian Meierdierck's Fall 2009 Regional Meeting presentation. Towards the end of his presentaion he goes through what can be done generationally with a max-funded WL on children.

 

[2112Greg]

OK, here's a question...what about the interest rates that are charged when taking out a loan against the policy. Can someone help me understand the moving parts involved in these transactions?

 

[BNTRS]

Usually not a lot of moving parts. The loan rate is typically equal to the crediting rate (loan wash) sometimes a little less or a little more. A lot of them vary, often time it's based on contract age.

 

[andrewodoardi]

Here is a graphic I use with clients. There's more to the conversation than just the graphic, but I provide an alternative to the usual conventional wisdom of 529 plans. PLI in the chart refers to my version of a MEC contract. Not a "modified endowment contract" but a "Maximum Efficient Contract". Whole Life funded to the MEC limit.

Thanks, very helpful

 

[pfg1]

One main thing I didn't see mentioned... the cash value in a PLI policy does NOT count against their EFC. Meaning you could have a huge amount of cash value in a policy, and potentially still receive full financial aid (as if you had NO $)

ANY $ in s 529 is automatically counted, and goes against your ability to rec'v financial aid. Sure, its $ you have saved for college so in a way, it seems fitting to have to use it....but if you could save the same $ and potentially not have to use it, wouldn't that be better?

I agree, a properly structured WL trumps a 529 in so many ways. Good thread.

 

[Norwayguy]

One main thing I didn't see mentioned... the cash value in a PLI policy does NOT count against their EFC. Meaning you could have a huge amount of cash value in a policy, and potentially still receive full financial aid (as if you had NO $)

ANY $ in s 529 is automatically counted, and goes against your ability to rec'v financial aid. Sure, its $ you have saved for college so in a way, it seems fitting to have to use it....but if you could save the same $ and potentially not have to use it, wouldn't that be better?

I agree, a properly structured WL trumps a 529 in so many ways. Good thread.

Just to clarify your post. A 529's assets are counted against the owner for financial aid purposes so if the owner is not the Ethernet or parent it does not count against them such as a grandparents or aunt or uncle not that I am recommending you have an uncle as the owner of the 529.

 

[jmhalvo]

Just to clarify your post. A 529's assets are counted against the owner for financial aid purposes so if the owner is not the Ethernet or parent it does not count against them such as a grandparents or aunt or uncle not that I am recommending you have an uncle as the owner of the 529.

529 counted but only 5.6% of it; not a big deal

 

[BNTRS]

Just to clarify your post. A 529's assets are counted against the owner for financial aid purposes so if the owner is not the Ethernet or parent it does not count against them such as a grandparents or aunt or uncle not that I am recommending you have an uncle as the owner of the 529.

Nor would I suggest having the "ethernet" own a 529.

529 counted but only 5.6% of it; not a big deal

Yup, while it is nice to have nothing counted, a 529's impact can be rather small especially given most are relatively small balances. A larger (i.e. better funded) 529 might pose more issues, but claiming the 529 will seriously mess up financial aid is more fiction than fact.

 

[jmhalvo]

Nor would I suggest having the "ethernet" own a 529. Yup, while it is nice to have nothing counted, a 529's impact can be rather small especially give most are relatively small balances. A larger (i.e. better funded) 529 might pose more issues, but claiming the 529 will seriously mess up financial aid is more fiction than fact.

or more sales than advice