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

Document Type

Article

Publication Date

3-2019

Abstract

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.

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