IS A 529 PLAN THE BEST WAY TO SAVE FOR COLLEGE?

A BETTER WAY TO SAVE FOR COLLEGE

If you have children I am sure the subject of saving for college or a secondary education has come to your mind. Many people by default go to their certified financial planner and are given a couple options. Those two options are a 529 plan or a custodial account where our child gets full control of the money at 18. The problem with a custodial account is the parent losses control of the funds.

Let’s take a closer look at these two options financial advisors share with their clients:

THE CUSTODIAL ACCOUNT: Most parents are not excited to lose control when turning over tens of thousands of dollars and in some cases 100’s of thousands over to an 18 year old or 21 year old (depending on the state.) I am sure you are confident you will raise your children properly to where they’d be responsible with the money but that loss of control is hard to swallow. Custodial accounts also can affect/reduce financial aid eligibility and scholarship prospects which will be unknown until closer to the time of high school graduation. Lastly custodial accounts provide a lesser tax shelter some are seeking to achieve.

THE 529 ACCOUNT: My wife and I had several reservations with these. The biggest concern we had was whether our kids decide not to go to college. To be honest we are okay with that especially if they choose an entrepreneurial or career path which allows them to provide for themselves and be productive members of their community without a college degree. If they chose this route and we did have funds in a 529 then we would pay a penalty to withdraw the money.

Other issues that could occur even if they did go to college:

Receiving a full scholarship and the inability to use the money for a “qualified educational expense.” If we didn’t use the money for a “qualified educational expense” then we would not only lose the tax benefits on the earnings, but would also incur opportunity loss on that money because we could’ve used that money for other investment purposes during the contribution years.

Most of the 529 plans charge ????, which eat away at growth.

Speaking of growth, you may not have growth and instead ????? ????? ?????? where your money would’ve been better put into a savings account. *** At the time of this writing 529 plans are taking a huge hit.

THE OTHER COLLEGE SAVINGS OPTION:

WHAT IF… What if instead of opening up a 529 plan for your children you insured them with an Infinite Banking whole life policy? Here would be the benefits of doing so:

You are always in complete control of the money unless you decide to turn the policy ownership over to your children. You or they could use the money for college tuition, start a business, purchase their first car, for their wedding, honeymoon, etc.

You would completely avoid the risk of loss. Remember 529s and custodial accounts are dependent on the stock market to grow and can lose account value.

You would avoid the 529 and custodial account fees.

You would have guaranteed growth year after year.

You could use the cash value for whatever you want.

You won’t get penalized for using the money as they grow older.

For these reasons it is a great decision to start banking policies for each of your children. You can utilize the policy to leverage its cash value while remaining the owner of the policy and when you feel they are mature enough and have gained the education necessary you can turn the policy’s ownership over to them to utilize the cash value however they please. They can also continue to contribute to their policies for the rest of their adult life for continued growth and tax advantages. It’ll be completely up to them!