529 College Plan
IUL VS. 529 Plan
College Planning in Maryland, Washington D.C. and Virginia
Maryland Annuity Resource offers College Planning services in Maryland, Washington D.C. and Virginia.
We believe that planning for college now rather than later will give you a wealth of options for your child. We use two distinct insurance products to achieve the goals of paying for college with unique strategies that ensure there will be funds when it comes time for tuition.
The first questions you need to ask is about parenting. For the most part, we are all parents either for the first time or second times in our lives and sometimes we make mistakes. It is not fair to pass on our own mistakes to our children. Just because our own parents made mistakes with you, does not mean we as parents have to do the same.
For those with college educations, and debt will always think about could they have chosen a different path. Those that attempted but ran out of funds would also think about how to do things differently. Some are free spirits and do not choose a path of higher education or just don’t have the means.
You know your children and grandchildren and you need to have this discussion with them to either follow your footsteps or make a plan of their own. We can help with that plan if they choose college or not.
- This website as well as many others are plum full of information about college, college planning, loans, interest rates, federal loans, grants, scholarships and many other resources. These resources are exponentially increasing with the advent of the internet.
- Teach your children about money, savings, interest rates and yes credit cards.
- Research professions, salaries and quality of life after a degree.
- Escape plan if not attending college. What to do with funds for college if not attending (start a business, tour Europe for a year, etc.)
How we work and what we use
Maryland Annuity Resource will meet with you, examine your financial goals for college and set a plan in place using one or two insurance products to achieve your goals. We do not use 529 plans because they have the potential for loss. Ideally, personal savings should be used to pay college costs but with a death of the primary breadwinner, the personal savings plan can come to an end. Personal savings would be used to pay off a mortgage, and pay other expenses.
A key benefit of Life Insurance, that does not involve death, is that is has the potential to accumulate cash value on a tax deferred basis. Those funds, meaning cash value can be accessed to help pay for college costs. Some of the advantages of a permanent life insurance policy include
- Stewardship by the Parents: The policy owner has control of the cash value. If plans change, the accumulated cash value can be used for other purposes without tax consequences.
- Growth on a Tax Deferred Basis: Cash values inside a life insurance policy generally grow tax deferred. Non MEC’s
- Options for Policy Loans: You are your own bank and there are several different options to help you access the potential cash values with the life insurance policy.
Considerations to using Life Insurance to fund College
There are items to consider before using permanent life insurance for death benefit protection and a way to help pay for tuition.
- Do you need additional Life Insurance for family protection. Are your policies outdated or term coming to an end.
- Do you have a child between the ages of 0 to 13 years old? Are you concerned about college tuition costs?
- Are you possibly looking to help supplement income in your retirement years if junior decides not to go to school or receives a scholarship?
These are all things that we will discover when we meet in person or over the phone. You are the only one that has a choice of how you want to handle things. All we will make are educated recommendations based on the information you provide.
Considerations for using Annuities to fund College
There are insurance instruments that are used to accumulate wealth and they are know as Annuities. We have several strategies that you can use to fund college costs with fixed or fixed indexed annuities. These will be qualified or non qualified, but we suggest non qualified. The interest earned with your annuity can be fixed, using laddering strategies similar to CD laddering. Starting small and building up to the minimum amount needed to start a non qualified annuity would be the starting point. Issue ages for annuities are age 0-80 for most carriers and the owner does not have the be the annuitant. Some examples of this are below:
- Parents can be owners of the Annuity, while the children are the annuitant. The parents can use the funds for either college costs or their own retirement portfolio.
- Grandparents can start an annuity at the birth of a grandchild, be the owners and have the child as the annuitant. If a death should occur, the funds would then be disbursed to beneficiaries which could be the parents or the grandchild.
- Funds grow tax deferred in annuities and only interest earned is taxed. Which is higher, student loan interest of taxes on interest?
- Fixed Annuities can have 1-10 year terms that mature and can be reinvested to 7-8 years just in time for college. Using this laddering strategy for fixed annuities keeps your funds liquid. No college, no problem, just rollover and reinvest.
- Fixed Indexed Annuities allow a yearly distribution option of 10% of the account value to help pay tuition costs. While having a fixed interest account and exposure to the upside of the markets only.
The path to College Planning should start at birth, not sometime in middle school. The power of time and compounding will ensure your children can attend Harvard, Yale, Princeton, instead of the local community college. The biggest obstacle to college in todays age is paying for it.
Maryland Annuity Resource can help you and show you a plan. It is ultimately up to you to allow us to implement it for you.