Step 1: Collateralize assets by leverage compounding interest
You still have to save the money, but instead of giving all that money to the college, you can collateralize the assets. When you collateralize the assets, you can take advantage of the power of compounding interest.
Step 2: Calculate the Expected Family Contribution (EFC)
This is the amount of money the government says each family should be able to pay per year to educate one child (Assess 25 percent of family income and 6 percent of visible assets).
Step 3: Identify how much you have to pay
This is where the EFC from the parents is added with any other source of income (student loans from need-based financial aid, grants, scholarships, etc.) to meet the expected tuition payments.
Step 4: Find the best and most efficient strategy for college expenses and retirement
You can combine your savings goals into one - use retirement dollars to help pay for college, and use college dollars to help with our retirement.
The preferred tool? Use a whole life insurance policy where loans can be collateralized from the policy to help pay for college, you can see how the numbers work with the policy’s loan summary.
Quick Take: whole life benefits as a college planning tool
- Death benefit coverage
- Tax-free access to cash via policy loans while contract is in force
- Not subject to market risk (unlike a 529 Plan)
- No restrictions on any expense (529 Plan assets restrict to select college expenses)
If you are interested in using whole life as a 529 alternative, please contact us so we can run illustrations for you, and you can then decide if the numbers make sense for you or not.