Money To Grow On - Fund a Child’s Future
The news is full of articles on The Sandwich Generation. These are middle-aged adults caught between caring for parents or grandparents and trying to build futures for their own families. These dedicated folks often sacrifice their careers and retirements to make sure the people they love are safe. What’s not commonly discussed is that the generation being born right now will likely end up in the same situation because many of their parents (The Sandwich Generation) will not have the resources to care for themselves.
The Next Sandwich Generation
Wondering how to soften the worst financial blows to your child or grandchild while helping them build their future? All without sacrificing your retirement plans to do it? By investing $100 per month while they’re an infant in a specially designed indexed life insurance policy, you can give them a helping hand throughout their lifetime. The gift is tax-free and avoids probate.
- Soften the blow when life gets tough.
- Help pay for college.
- Provide money toward a down payment on a house or a new business.
- Give retirement income a big boost.
Whatever life throws their way, your gift will be there to help them through.
Soften the Blow
When the unexpected happens, tax-free withdrawals and net-zero loans (available after the first year of the policy) can ease the pain.
- Emergency fund – free cash withdrawals and net-zero loans are available after the first year of the policy. The money is tax-free and with no restrictions on how it’s spent.
- Benefits for illness or long term care – medical costs not covered by insurance are one of the top 5 reason people go bankrupt. These specialty plans include payments to cover care for terminal illness, long term care and critical care. The example policy we’re using would pay out the following estimated benefits if the insured child has already used the policy to help pay for college and provide a down payment on a house (or business).
- Terminal Illness – a single cash payment of $190,900 at age 75
- Chronic Illness (long term care) – $118,700 at age 75 per year for as long as 4-5 years
- Critical Care – a single cash payment of $4,700 at age 60
- NOTE: If no other withdrawals are made before the illness benefits are needed the policy would pay $338,200 for terminal, $189,400 for as long as 4-5 years for chronic, or $37,300 for critical illnesses.
- Death benefits for their loved ones. The protected death benefit would be $114,740 in our example but can be set at different levels to either increase or decrease the lifetime income and cash and loans available.
NOTE: Taking any of the above benefits will lower the money available to provide “money to grow on” as described below.
Money to Grow On
In our example, we’re assuming the insured child will use the policy you gift them to help them reach their dreams and give them some extra income in retirement.
- Help pay for college. College can be so expensive that many people end up with debts crippling their income for the rest of their lives. In our example policy your child or grandchild would be able to withdraw $8,500 per year for 4 years starting at age 18 – tax-free!
- Provide money toward a down payment on a house or start a business. Education is only one aspect of building your little one’s future. The American Dream is owning a home but so few of The Sandwich Generation can afford one. And young adults are beginning to give up on the dream. Imagine how much they’d appreciate $30,000 tax-free cash (at age 35) to help make a down payment on their own home. Or what a boon $30,000 could be to a young entrepreneur!
- Give retirement income a big boost. By age 65 the example policy is paid in full and by age 67 social security is at full retirement age. Your gift continues to make your grandchild or child’s life better by providing a healthy boost to their income for the rest of their lives. In our example, your child or grandchild would receive a lifetime income of $110,250 per year tax-free until they reach 100 years old.
How It Works
By now you’re probably wondering how $100 per month for 65 years, a total of only $78,000 in premium, can pay for so much. You’d probably be shocked to learn that a single payment of $21,210 would provide the same results. Well, there’s no magic here except time, careful money management and the right type of life insurance plan.
By starting the policy when your child or grandchild is an infant you create the time it takes for a small investment to turn into a large fund because of the power of compounding interest based on indexed funds and tax-sheltered growth.
By taking advantage of tax-free withdrawals and net-zero loans that large fund created by time and compounding interest can produce larger payouts. Of course, you have to invest in a versatile, low fee life insurance policy properly set up and utilized to make it work.
NOTE: While every effort was made to keep our example realistic, the actual values in your policy will vary based on the amount of premium payments made, when the premium payments are made, the actual cost of insurance and policy expenses, loans, withdrawals and other policy changes varying from this example, and the actual rate at which interest is credited to the policy. Our example does not create a taxable income but varying from this example may.
Next Steps:
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If you want to explore creating a lifetime of gifts for the children in your life, set a time to talk with us. We’ll help you understand how it all works and guide you towards a policy that embodies your dreams for your next generation of family.