Hi Christine, I know Dave is a well respected advisor on these boards, but I have to say I have always been told to steer clear of anything other than Term Life. Thanks... uhh, I think? Hopefully I'm not losing any respect from the lack of financial planning experience from whoever 'always' told you to steer clear of anything other than Term Life. Many people here have also "always" been told to pay off their mortgage as fast as possible, "period," regardless of the risks & harm it can create too. What many have "always" heard is not always so valid. Dave perhaps you could clarify why Universal Life is a good option in general and also specifically in this case? I have been on this site off and on for a very long time, however, I have not read that many posts on this particilar board to know your general philosophy on this. Sure. FIRST off, it is most likely the case that "everyone" who "always" advised you to avoid anything but "term" was specifically talking about buying life insurance for the purpose of the insurance DEATH benefits... not the financial planning features available within certain types of it. For the best death benefits "bang for the buck"... Term life premiums are state regulated, so for the most part you pay for the benefit coverage you get, and nothing more, regardless of the carrier (which is GOOD if what you want is a payoff at death.) Differences in term life premiums are generally quite small, and when one carrier appears to be "cheaper" per $1,000 of benefit than another (i.e. if you Google for 'cheapest term insurance' etc.) its generally because that carrier has less capital reserves to protect its policy-holders, thus less costs... and is thus more at risk of being illiquid... *OR* it fights harder NOT to pay all of the benefits expected when its policies mature, and thereby it has less costs of fulfillment. There are OTHER very important financial benefits to life insurance contracts, however, OTHER than the ultimate payoff of a death benefit at policy maturity. Congress has written legal "tax-shelter" features into the IRS code such that cash values sheltered within properly structured life insurance contracts grow and are harvestable UN-TAXED. Universal Life *IS* a term life policy (underwritten through age 100,) that offers a SEPERATE (un-comingled) cash accumulation account with the unique tax sheltered benefits only available inside cash-value life contracts. (NOTE that this is distictively different from old-fashioned "whole life" contracts that inseperably comingle insurance costs with their cash-values.) For FINANCIAL PLANNING purposes we want the maximum shelter benefits with the LEAST actual insurance coverage we can get away with (since, for this particular purpose, we don't care about death benefits.) The cash account within a Universal policy is allowed to grow tax free (no annual capital gains nor income taxes,) and is allowed to be accessed for spending tax free (via zero-interest policy "loans" which have no repayment requirement until the policy "matures"... aka when the insured dies.) Our OP is concerned about college tuition fund planning. The general strategy with college funding is to take advantage of *ALL* external funding resources (public assistance, grants, loans, and public/private scholarships) *BEFORE* dipping into the family-accumulated funds. THe catch-22 is that *MANY* external funding sources are "means tested." This means that they look at the student's fmaily's financial profile 1st... and if the family has funds in reserves, the external sources DEDUCT those from the support calculations (in essence saying "you guys drain your OWN accounts before we'll offer you any support!") Of course, this is completely contrary to the idea of rewarding those who are responsible... which is the whole point of using Universal Life insurance contracts to accumulate college tuition (and subsequently retirement funding for the parents.) Universal Life policies can also be "owned" by someone other than the person that the policy is insuring (the "insured.") The owner can be grandparents, uncles/aunts, god-parents, seperate trusts, or simply trusted friends. Because the ownership of this accumulation asset can be legally seperated from the student's family balance sheet, the student's family does NOT have to drain all of their own reserves before taking advantage of external educational support resources. PERSONALLY (and professionally,) in regards to actual death benefits... I would probably almost "always" harmonize with whoever else was "always" telling you to avoid anything other than term life. For death benefits (replacement of a parent's income for family support, most commonly,) term is generally the best way to go. For FINANCIAL PLANNING, however... age-100 term life coupled with cash values (in the form of Universal Life,) can be a very sharp strategy from both the tax-shelter perspective, and the avoidance of means-testing punishment of the more financially responsbile. Cheers, Dave Donhoff Leverage Planner

If you do not study investments alot, I would not bother with trying to manage it. Chances are pretty high in my opinion that you'll never get as good results as the pros who make their living managing money. True, but rolling it over into an IRA at a financial house of your choosing often gives you more options: for example, lifestyle-geared investment plans (more aggressive for younger clients, more conservative for when you don't have time to make up a bear market); index funds (more than just the Dow Jones or S&P 500); etc. There are lots of people who can offer easier investment strategies ("couch potato" portfolios, "one-minute" investing, ...) and while one size does not fit all investors, if you find an investment approach that has appeal to you, it very likely will be easier to pursue it at a large investment house than through an employee-sponsored plan.

And here's an article (excerpted) that just showed up today in the WSJ. Many people hold stock in their 401ks, so this does seem a potential issue. There is simply no telling what the income tax and capital gains rates are going to be at the date of your death, so keeping at least these minimal records (cost basis) certainly wouldn't hurt. The article goes on to point out that Congress can make retroactive changes in the estate tax laws; it's been proven legal as the IRS won the two cases filed against them. Will the Estate Tax Disappear? Changes in the Way Inherited Assets Are Valued Could Cost Heirs and Cause Hassles WSJournal October 22, 2009 Many people hope the federal estate tax will disappear next year, as scheduled. They could be sorry if it does. Back in 2000, Congress enacted a gradual loosening of the estate exemption. It has since risen to its current level of $3.5 million per individual, or up to $7 million per couple. The tax is scheduled to lapse just for next year and return in 2011. Washington insiders are betting lawmakers won't let that happen. Instead they believe Congress is likely to act before the end of this year to extend the current system through next year. And perhaps they should, because getting rid of the estate tax actually would cause problems for most taxpayers. At issue is the "step-up in cost basis" that all assets receive when an owner dies. The way the law is currently written, if the estate tax goes away, so does the step-up in cost basis. That's where the problem lies. Step-up means that the property heirs receive is valued as of the date of death. So if Grandma leaves a grandchild stock selling for $75 a share that was bought in 1970 for $2 per share, the heir's "cost basis" in the stock is $75. If the grandchild then sells the stock for $80, the taxable gain is $5 per share. The same holds true for both real estate and personal property, like an heirloom ring or art. If Congress fails to extend the current system for 2010, then at the owner's death all assets would retain their original cost, called "carry-over basis." Under this system the heir's stock would have a cost basis of the original $2 per share rather than $75. If he then sells the stock at $80, the taxable gain would be $73 instead of $5Âa huge difference. For most heirs the switch to carry-over basis would mean paying far more in extra income taxes than is due under the current estate tax system. Currently only about 5,500 estates are federally taxable each year, because is exemption is fairly high. Carry-over basis would also pose a massive record-keeping burden, forcing multiple generations of taxpayers to keep documents over many decades.

As sable said above, it is a choice if mutual funds offered under the 401k plan and often stock with the company (employer). When I was working, my employer contributed 50 cents for every dollar I chose to put into my 401k, up to 6% of my salary. Bingo...I immediately made 50% on my money, but there were stipulations. That 50% was not really mine until I had my account for 5 years I believe and became fully vested. The 50% that they 'gave' me was in the form of company stock, GTE or Contel at the time. These funds are NOT in the investor's control. Once your money is in, you're allowing someone else to make decisions for you--and trusting that they're as concerned about your future as you are (unreasonable, right?). Not to mention--they aren't as safe as we've been led to believe. There are people already who have LOST their investments in these instruments. Not a common thing, but it is possible. Are you speaking of 401Ks? Did those who lost everything maybe choose to put all their eggs into one basket, by just holding company stock in their 401?...not a good thing at all. All 401k that I know of, have a choice of investments to choose from...see link from my post above. The employee controls what funds their money is in within the 401, and can change the allocation at any time. Some employees just choose to do an equal mix of things...say 10 funds, putting 10% into each of them. Others maybe choose a 1/3 mix of aggressive, moderate, and conservative. Placing one's savings, whatever it is, 401, sep, IRA, is not for those who do not understand the market and its many ups and downs. Because of that, some will lose sleep over what appears to be lost, even if it is just temporarily. About 30 years years ago, I remember my (company) stock climbing a good bit in one day. I made $5,000 in one day! Boy was I ecstatic! When it later came down, did I lose money? No. Did I really make $5000 that day it climbed so much? No. I only would have made the money if I had chosen to sell it while it was up. It later came down some, went up some, came down some, etc, and has served me well to this day with its nice dividends. Often times one loses on a stock, or fund, if they choose or must sell when the market (stock or that fund) is down. Sue