- A max-funded IUL
is far better than a 529 college savings plan.
In this educational episode,
I'm going to address the question,
is there a college savings plan that is tax free
even if you don't use the money to pay for college?
I'm going to share one with you next.
So stay tuned.
(upbeat music)
My name's Doug Andrew, and I've been a financial strategist
and retirement planning specialists
now for more than 48 and a half years.
Helping thousands of people optimize their assets
and minimize taxes
and meeting with thousands of people primarily to make sure
that they save enough for retirement
so they will not outlive their money.
To accumulate their money tax free
and then be able to access that money income tax free
and be able to not outlive their money
due to the negative impact of taxes inflation
and market volatility.
Well, when I meet with people for that primary goal,
usually I will ask them,
are you setting aside money for your children
or maybe your grandchildren for their college education?
Many, many people do that.
And they will usually say, yes, we are socking away money
into a 529 college savings plan.
And I go, ugh.
And they go, "Well, what's wrong with that?"
Well, not so much what's wrong with that
but what it doesn't allow you to do.
So when I tell them that they can use a max-funded IUL,
structured, correctly and funded properly
which then qualifies to be what I call a LASER fund.
LASER is an acronym
that stands for liquid asset safely earning returns,
I show them that there's a lot more flexibility
and you don't have to jump through all these hoops
like you do with a federally sponsored
529 college savings plan.
In a nutshell, a 529 college savings plan
allows you to set aside money
and accumulate that money on a tax favored basis,
but there's some restrictions and limits
on how much you can set aside.
And also when you're ready to start taking money out,
how you take that money out,
how you report that
because the government wants to make sure
you are using that money for college education.
If you don't use it for college education,
there are a few ways that you can transfer it
until somebody else in the family uses it
or that you're paying off student loans or whatever.
But if you access that money for other purposes,
not only do you trigger tax,
but you can also incur a 10% penalty
for premature withdrawals
just like maybe an IRA or 401k that you may tap into
before the age of 59 and a half.
I don't want all of those strings attached.
So for years, I've been counseling people
to set up a max-funded
index universal life insurance contract
or use their existing one
that maybe they were using for retirement
and put additional deposits into that to use
for the same goals as a 529 plan
with a lot more flexibility.
So let's talk about how to do that.
This would be like a private college savings plan.
You're earmarking a set amount of money,
or maybe a particular
indexed universal life insurance contract
for college funding.
Now you can put in after tax dollars
which I would recommend you do
so that you can access that money totally income tax free.
But what are the advantages of an IUL policy,
a LASER fund over a 529 plan?
Well, I can set aside as much as I want into an IUL policy,
based upon the death benefit
that's coming along for the ride.
Based upon my age, my gender, my health
or I can use a surrogate insured, but I can own it.
And I can set aside thousands of dollars.
There's no limits
into what I can deposit into that IUL policy
if I'm earmarking it for college funding for my children
or maybe my grandchildren.
Now, if I put money in
and then I need to access some of that money,
for whatever reason, I can do that,
I don't have to wait until college.
I can access money.
There's no tax that is triggered.
There's no 10% penalty like you would have with a 529 plan.
But if I happen to die
then the money inside the IUL policy will blossom
and transfer income tax free.
And you can name your children or grandchildren
or a trust as the beneficiary
that designates that money,
that death benefit will go to fund college
for your posterity, but it will blossom.
So if I'm setting aside $500 a month or 1000 a month
or whatever it is,
and I want to take the least amount of insurance
that the IRS will let me get away with
so that the money grows at a great internal rate of return,
if you're gonna average 11, I wanna net 10.
If I'm gonna earn nine, I wanna net eight.
And so you want the cost of the insurance
to be as small as possible.
That's why you wanna structure it correctly
and fund it properly.
Then it is qualified to be called a LASER fund, okay?
And so you're doing that
but still there's a minimum amount of insurance
that's required.
If I'm gonna set aside 1000 bucks a month,
that's 12,000 a year.
The TEFRA and DEFRA tax citations
dictate the minimum amount of life insurance
that must be attached to the account
in order for it to qualify to be totally tax free.
And so that death benefit could be 100,000, 200,000,
a half a million, whatever
depending upon how much you're setting aside.
And if you started to put in 1000 a month
or 2000 a month into this college savings plan
and you happened to die in an accident
or you got cancer, whatever,
you would leave behind several $100,000
in a tax free death benefit, a 529 plan does not do that
unless you buy insurance to do that.
So the insurance is coming along for the ride
in an IUL policy, so that if I'm socking away money
and I happen to die, I know that that goal will still be met
because the life insurance
I'm sucking away 12,000, 20,000 a year, whatever it is
but if I die, I leave behind a quarter of a million
that then will allow them to go to college
or what have you in that funding plan.
And it's totally income tax free.
So people say, well, how much does that cost?
Well, nothing's free,
but it doesn't really cost you anything
because it's being paid for
with otherwise payable income tax
if you socked away that money
in a normal savings account, or what have you.
You're actually going to earn a rate of return,
let's say like I have I've averaged 11.17% and netted 10.07.
So if you earn 11, you're netting 10.
That 1% difference is the cost of the insurance
that the IRS says has to be there
in order for that money to be growing
at an internal rate of return
of nine or 10% whatever totally tax free.
Does that make sense?
And so I like the IUL
as an alternative to save for college
because I don't have the restrictions.
I can put in whatever amount I want to.
I can access the money for whatever reason I want.
It doesn't have to be for college.
And if I happen to die blossoms and fulfills the plan
but you wouldn't believe how many people tell me
that they were using a 529 plan
and then their child
got scholarships and didn't need the money for college.
And so they wanted to use the money in the 529 plan,
maybe for a down payment on their first home
or maybe to start a business and they couldn't do that
without having to pay tax on that money as it came out.
Why did you do that?
You could have had to be tax free all along
by using an IUL policy.
So I maintained that if you're wanting to save money
for your children, your grandchildren for college
and you want to assist them in my family bank,
I don't just pay for their college,
I require skin in the game.
They have to get good grades.
They have to get a scholarship,
or if they're short on money,
they borrow from the family bank,
and this is where I get the money to loan my children
or grandchildren, if they need help with college
and then they can pay it back with cash later on
once they graduate and start making money
or they can work it off by mowing lawns
or painting or shampooing carpets or whatever
because I've never believed
in just paying for their college.
I require some skin in the game so to speak.
You can learn about that in my book,
"Entitlement Abolition"
because a lot of kids, if you just pay for everything,
they get in an entitlement mindset.
And I don't want my family to have that entitlement mindset,
will you pay for, can I have?
But I still use an IUL policy to have the wherewithal
to loan them
or to match what they might earn in a scholarship or save
if they want a semester abroad
whatever my rules of governance say,
that is what I use is an IUL contract
to have the tax free access to money
anytime, for any reason,
it doesn't have to be just for college.
So if this makes sense
and you want to explore how you can set up a LASER fund
for your colleague savings,
I would recommend you claim a free copy of this book,
"The LASER Fund,"
I will pay for the book.
It's a 300 page book,
it's been flying off of our warehouse shelves.
We send out about 1000 of these a month.
I don't want you to miss out.
You could go to Amazon and paid 20 bucks.
It's 300 pages.
A jam packed with charts and graphs and explanations
and also 62 actual stories of how many, many of our clients
have used the LASER fund,
not only for retirement,
but for goals such as college funding.
So it's actually two books in one.
This side is the left brain side
with all the charts and graph.
This side is the right brain side with all the stories.
So you can use your right brain or left brain
but here's how you claim your free copy
for this 300 page book.
You simply go to laserfund.com, L-A-S-E-Rfund.com
or click on the link below,
you contribute a nominal amount
towards the shipping and handling.
I require some skin in the game.
I'll cover the rest of that cost
and I will pay for the book.
I'll fire out a copy to you,
and check out there if you like to listen and learn,
watch and learn.
Maybe even you can attend one of our webinars
that we hold on a regular basis.
You can even schedule an appointment with an IUL specialist
that will help you structure one correctly
and fund it properly so it qualifies to be a LASER fund.
But this is about you, your family and your brighter future.
(upbeat music)