IUL Versus 529: The College Saving Battle No One Talks About
VIDEO TRANSCRIPTION – IUL versus 529, the college saving battle no one talks about. Hi, I’m Steven D. Cooper, your tax strategist with Coopers Accounting Service, because your financial freedom matters.
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First, what is a 529? Well, it is a tax advantage investment account that you can go into higher education, college, for example, trade school, or including certain K to 12 programs as well, too. But here’s one of the drawbacks to the 529 plan versus the I.U.L. In the I.U.L. for business owners is the tax write-off.
I have spoken to several clients that have children and they look at it and say, you know, I can invest where I can earn 8, 12%. That’s great. But when you pull the money out, pay taxes on it. So from a, if you want to compare apples and apples, your investment has to do 40 to 50 % to be in comparison to the IUL.
What makes the IUL? Once again, this is designed for business only, you want to have your children between the ages of five to 18, you can put them on payroll. That’s tax deduction number one. Then you can pay them up to $16,100. So in this example, let’s say that at the payroll taxes, the net from that is 13,000.
Then here’s tax deduction number two. You then can invested into an IUL that qualifies under employee benefits. Once again, that’s tax deduction number two. So if you get what I just said, you can use the same money and get two deductions out of it. What are they again? First one, $16,100.
That’s payroll deduction. Tax deduction number two. When you put it invested into an IUL.It counts as employee benefits. Two deductions, one investment. Now, when the child turns 18, you’re going to fund it. So let’s go to the funding process. You can have the cash-to-render life value from 150,000, 250,000, 300 plus, thousand dollars. But when you borrow from it, keyword borrow, that is a tax-free exchange.
That’s what makes the IUL such a powerful weapon for business owners. That’s one of the reasons why if you hear certain tax strategies, we’re going to tell you to get a business on the side. There are so many advantages of creating your own business.
We can help you with that as well too. Now I’m going to explain something. IUL, Indexed Universal Life Insurance Policy. You have a cash surrender value on top of it. That’s what you want to fund. But while you’re funding this, let’s say you’re putting in the 13,000, you may be putting in $1,000 a month or $100 a month, you can write that off on your business again.
529 plan, you cannot write off on your business. This is what we teach our clients how to leverage the money that you’re going to pay for anyway. Might as well get a tax write off for doing this. Think about that for a moment. Once again,
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