For most of your adult life, you likely had a life insurance policy. Most people get their life insurance policy from their employer and don’t think much about it. These policies are generally offered as part of a benefits package for full-time employees. It’s also possible that you took out a life insurance policy once you had children so that they would be protected if you died unexpectedly.
A college education is something that most parents want to provide for their children. In America, having a solid education is key to landing a better job. But saving for this education can be daunting. Fortunately, college savings tools like 529 plans and permanent life insurance make it easier to save for educational expenses.
Below you’ll find more information about 529 plans and whole life insurance in NJ and which one is a better college savings plan.
529 Plans vs Whole Life: What’s the Difference?
529 plans in New Jersey are similar to a Roth 401K or RothIRA but are intended to help pay for college expenses rather than retirement. Through a 529 plan, you can invest in a variety of mutual funds and earnings will grow tax-deferred. As long as your child uses the money for educational expenses, the withdrawals are tax-free.
While a 529 plan is the gold standard for saving for college, it’s not your only option. Permanent life insurance is also an excellent way to save money. When you pay into your policy each month, some of the money goes towards the premium and some goes into the cash value. The money in your cash value grows tax-deferred, similar to a 529 plan.
Why Permanent Life Insurance is Better than a 529 Plan
Each family is unique, so you’ll have to make the best decision for your circumstances. That said, Leonard Financial Solutions typically recommends whole life insurance as a college savings plan. Here are the reasons why.
529 plans are not bad. They have many advantages, and we understand the appeal to them. However, they are not the only way to save for your child’s post-secondary education. Permanent life insurance is worth a look. If you would like a life insurance quote comparison in NJ, contact Leonard Financial Solutions.
Some types of life insurance in NJ have an investment feature called a cash value. This part of your policy earns interest and may be available for you to borrow against one day. While there are different life insurance policies, the most common one you’ll come across is whole life insurance. Term life insurance, on the other hand, does not have a cash value.
If you’re interested in taking out a whole life insurance policy, you’ll be pleasantly surprised by how much money you can earn over the years. It’s an excellent asset that builds tax-free wealth - and there’s not much you need to do but pay your premiums!
It’s also worth noting that whole life insurance offers “limited pay.” This allows you to pay your premiums for a limited number of years. Once you’re paid up, your cash value and death benefit will continue to grow, and the benefits will last a lifetime.
How Does the Cash Value in a Life Insurance Policy Work?
Permanent life insurance policies generally offer two features:
Am I Able to Access My Cash Value?
It is possible to access your cash value when you need it, but it does depend on your policy. Also, keep in mind that when you borrow against your policy, it can reduce your death benefit. Generally speaking, there are three ways to access your cash value:
What are the Benefits of Cash Value Life Insurance?
If you are considering cash value life insurance as an asset, you’re probably wondering what the benefits are. Whole life policies are not cheap, after all, so you want to be sure that you’re investing your money into the right places. A financial advisor in New Jersey can help determine the best options for you, but here are some benefits to expect:
If you are interested in whole life insurance, contact Leonard Financial Solutions today for a free life insurance quote in NJ. We have solutions for everyone based on your needs, financial goals and budget.
You may know a 529 plan as a tax-advantaged savings vehicle to help fund a college education (Not familiar? See below). You should consider whole life insurance as an alternative with similar contribution, accumulation and distribution tax features of a 529 plan, but with additional benefits. This option will allow you to:
Have you protected your income?
Disability happens. You can’t predict whether or when it will strike. However, you can prepare in case it does, with a customized disability income insurance plan. This protection can replace a portion of your income to help maintain your current lifestyle if you suffer a disability covered by the policy. Your income is your most valuable asset and has the potential to be substantial over your working lifetime. But to earn it, you must be able to work.
Leaving this life behind can get expensive. Not for you, but for the loved ones you will be leaving behind. That is why life insurance is a great way for us to protect the ones we love, even if we are no longer with them. Our final expenses are not limited to funeral costs. There will be taxes and other associated costs, ceremony fees, clergy donations, and even leftover loans and mortgages.
Whole life insurance is a guaranteed life insurance policy. It remains in force during your whole lifetime and upon your death, payout is guaranteed to your beneficiaries. This is, of course, subject if your required premiums are paid.
Protecting our loved ones from financial hardships when we can’t be there for them anymore is the main reason why we get a life insurance policy. But what if you only need to protect them from long term expenses such as the mortgage, a home equity loan or your children’s education? A return-of-premium-life insurance assures that you will get your money back if you outlive your policy term. This type of insurance guarantees that you’d be able to give your loved ones the financial protection they need.