Mass Mutual 10 Pay for Funding Kids' Education?

svn

New Member
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Hi,

I have been trying to figure out if Mass Mutual's 10 pay life insurance is a good option for funding my kids' education. I have 2 young kids and am trying to plan for their education funds. I am not a big risk taker. Have already looked in plans like 529 and don't like them as much for various reasons. Thinking that if I invest in stocks / mutual funds - they may perform up and down and the day I need the money, if the market is down, it may not work in my favor. Also, when I consulted with a few people, I heard that any safe mutual fund would give you an annual return of around 7% average. Mass Mutual promises around 7% or more annually in their 10 pay policy. Also, when you take out the loan on this policy, their is no tax and it can be used on anything other than education if ever needed. When I tried to research the net, I don't see too many people invested in this for education purpose. I am wondering what is that I am not able to see through. Would I be making the right decision?
Please advise.
 
There are a lot of people who use it for college funding. It's not a countable asset on the FAFSA form. The best thing to is have an agent run an illustration also showing sequential tax free withdrawals at at age 25 or however old they will be.

It's pretty simple if it works in the non-guaranteesd side you should be good. Have the agent run it a couple of points less than the estimated non guaranteed about to be in the safe side.
 
7% is the dividend rate, currently actually 7.1%. Which is not the rate you earn. However if insured is in excellent health and not too old.....after 15 years internal rate of return high 3%, maybe 3.8 ? 20 years.....mid high 4%. I think it's a good idea. Although if in good health I would put the policy on the parents life....yes you can borrow etc. And don't forget the death benefit !
 
To maintain the tax free status of withdrawals the policy has to stay in force. But again, an illustration will show you how much you can take out without crashing the policy. Not very complicated.

Yes... As a rule I don't like sales phrases but calling a policy like this a "Roth with a death benefit" is a fair thing to say. (It's not actually a Roth!)
 
I have the Mass Mutual 10 pay for my son, as well as an IUL in the same amount (2500/year premium for each policy).

You're not going to get 7% returns on the mass mutual policy...hate to break it to you. Probably mid-4s to low 5s LONG TERM (like 25+ years).

I am not using it for college funding, but primarily to ensure that my son has guaranteed access to life insurance no matter what happens to his health in the future (currently as well as with the optional guaranteed insurability rider on the MM policy), as well as a vehicle that I can teach my son about uninterrupted compounding, a safe place to earn a very good risk adjusted return...basically, i haven't found another asset that gives me a very nice return for virtually no risk (I am pretty confident that MM will be around long after I am gone).

Anyways, I am not an agent. An insurance policy is where I put my safe money and it is very safe.

As for college funding, I prefer to let the large endowments of the top elite private schools fund my son's education. They provide full need based grants to "poor" students, and their definition of poor is a family with an income AGI under 70k/year (or 75k at Stanford where I went to school) and regular countable assets. Make sure you pick a school where having high home equity does not count against you, or better yet, make college optional as long as they make something of themselves.

That's why I only contribute to my 401k, funded several very large WL and IUL permanent insurance policies and bought the most expensive house that I could afford in CA. When we retire early from our current well-compensated jobs and find a fun but lower paying part-time job, we would be considered "poor" because our W2 income would be low. The college financial aid system is messed up. However, I didn't make the rules, but I do plan on playing the game to the best of my ability.

Good luck to you!

Cardinal93
 
I wouldn't use a policy to try to stuff a bunch of money into it only to pull the plug and "drain the tank" to hand over to the college, but...

Here's a concept. I start early and maximally fund a permanent policy before college. When it's time for college, I use the cash value via policy loans to pay (or help pay) the tuition, etc. I have to pay the loan interest each year (or it's added to the loan) but I DON'T have to repay the principle during my lifetime.

The loan is paid from the death benefit when I die, and assuming the kids were going to ultimately get my stuff after my wife dies (assuming I died first), the kids paid for their own college due to the college policy loan reducing the net death benefit.
 
I wouldn't over complicate this. Look at an illustration in all columns with anticipated contributions. Forget about the stated return. Policies have expenses HOWEVER look at the cash build up and see if that's for you. It is a "fixed" product so you don't have to worry. (Technically you're a shareholder of the company if it's a mutual company so I guess you're invested in that sense).


I'm not a believer in buying to Guarantee insurability because most of my clients kids empty out the cash. And the DB is bubkus if that's all they're going to have over a lifetime.

Don't complicate it. Tell an agent what you want to spend have him "run it"
 
I'm not a believer in buying to Guarantee insurability because most of my clients kids empty out the cash. And the DB is bubkus if that's all they're going to have over a lifetime.

I would have to disagree. If the GIO Rider is on there and is taken advantage of then you can add a good bit more over the years by the time they are 30 or 40. And since it is WL (hopefully dividend paying WL from a quality company) the DB will keep up with inflation and remain a decent final expense type policy even without the GIO... especially if it is a 10 pay or 20 pay since they have better performance vs. a traditional life pay policy.

Also, if it is a 10 or 20 pay, I recommend to clients not to transfer ownership to the kids until they are at least 25 or 30. I usually tell them to wait until they have a solid job or have a wife and kids. That way they will appreciate the policy a lot more than some 18 year old who sees it as a crap load of beer money... lol.
 
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