Hey all,
I'd like to run a plan my financial planner suggested to my wife and I regarding Student Loans by you all to see whether it passes the smell test.
The plan is this (as condensed as I could make it, given my knowledge):
We roll our student loans into one of the income driven repayment plans then certify for the year using a pay stub that shows low income after we do a big 401k pre-tax contribution, which would drop the monthly SL payment to a low number.
We effectively do that for the next 20 years and wait for loan forgiveness to come about.
In order to combat the tax hit that student loan forgiveness will make* we open a Whole Life Insurance plan and pay effectively what we would be paying to the student loan companies into that for the next 20 years. From what I understand, there's a certain percentage of the WL plan that can be withdrawn tax free...and the plan that has been detailed to us is set up so that 20 years down the line, we will be able to withdraw the entirety of the loan forgiveness tax penalty from the tax free portion of the insurance plan.
As detailed to us, the Whole Life Insurance plan is fairly well insulated from stock market fluctuations, etc, and there is generally low risk associated with this plan.
So, my question is, does this plan make sense? Is it indeed low risk? Are there any downsides? I'd love any and all opinions about it, as we are definitely working outside of my zone of familiarity right now.
*I was not aware of this before had, so making sure I understand correctly, student loan forgiveness is considered income when it is forgiven, so if in our case, $150k worth of loans are forgiven, we then have to pay taxes on that income. Is this correct?
Submitted May 23, 2018 at 02:21PM by Seshameh https://ift.tt/2KQM1bD
