Notes

How exactly to Use Juvenile Life Insurance to Help Save for College
According to the faculty Board's most recent report: Trends in College Pricing 2010, on the decade from 2000-01 to 2010-11, published tuition and fees at public four-year colleges and universities increased at an average rate of 5.6% each year beyond the rate of general inflation. From 2000 through 2009, the S&P 500 index returned -24.10%. The dramatic rise in college tuition costs and staggering loss of personal wealth have forced parents to explore alternatives to existing college savings strategies.

For the past decade, financial planners have recommended tax-advantaged 529 plans as the primary vehicle for college savings. A 529 plan is really a tax-advantaged financial product intended to pay "qualified educational expenses" (e.g., college tuition). Plans are generally state-sponsored, but administered by investment companies. Families can pick from an array of professionally managed funds both in and out of their resident state. check here allow tax-deductible contributions for state residents.

In reaction to high fees and 529 plan underperformance, financial strategists are thinking about whole and universal life insurance coverage as a college savings alternative. The tax-deferred cash value accumulation of whole and universal life insurance coverage includes a few of the same tax benefits of the 529 plan, with performance guarantees and reduced volatility.

Unlike a 529 plan, the cash value of juvenile life insurance can be used anytime, for just about any purpose, without penalty and is not limited to qualified educational expenses. If the child is lucky enough to secure a scholarship or decides to postpone college, the funds continue steadily to grow and lifetime fully-paid insurance is available once the need arises. After the insured reaches age 21, some insurance firms offer the possibility to purchase around $2,000,000 of additional coverage with out a medical exam.

The money value of juvenile life Insurance is sheltered from the federal financial aid needs analysis process, a significant consideration for upper-middle class families on the "bubble" for school funding.

Juvenile life insurance coverage provides growth guarantees, unavailable with a 529 plan. The 38.5% decline in the S&P 500® index in 2008 dealt a devastating blow to an eternity of carefully managed savings - just when the money was needed most. A whole juvenile life policy that increases by way of a minimum guaranteed interest rate, and also a non-guaranteed dividend declared annually by the insurance provider, can provide funds needed at the same time certain, with less risk. Indexed juvenile life is permanent universal life insurance coverage which has cash value increases from the performance of an equity index (e.g., S&P 500®) up to certain percentage (a "cap") with downside protection (a "floor").

Some indexed juvenile life products have a guaranteed minimum interest of 2%. For parents ready to forego an increased initial guaranteed interest rate, an indexed policy is structured to increase in value once the stock market rises and can not incur losses if the market goes down.

James Garfinkel is the founder and President of New Amsterdam Life and a director of the non-profit Saving For College [http://newamsterdamlife.com/college_first.php] Foundation. James has been developing wealth planning and transfer solutions for folks and their families for nearly 30 years. James provides customized financial, insurance, tax and estate planning strategies which will conserve, grow and transfer wealth. For more info Visit Here [http://newamsterdamlife.com] or can be reached by e-mail at [email protected].
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