College Educational Planning: Indexed Universal Life Insurance versus 529 College Saving Plans

This study compared the performance of indexed universal life (IUL) insurance policies with 529 college saving plans in college education planning by Monte-Carlo simulations and sensitivity analysis. The IUL policies showed lower return and risk than the allstock 529 portfolios but higher return and risk than the typical age-based 529 portfolios. The expected family contribution (EFC) impact should be considered in the decision-making process. All key market variables were modeled as correlated stochastic processes in the simulation. Important actuarial assumptions and tax-related issues driving the performance of the IUL and 529 investments were thoroughly analyzed. The study reported how these factors affected the performance of two alternative funding solutions.