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College savings plan: 529 vs Whole Life
Posted on 7/29/13 at 9:35 am
Posted on 7/29/13 at 9:35 am
Which is better? I'm finding conflicting reports on the internet.
5
Posted on 7/29/13 at 9:45 am to Salmon
Better is sort of a relative term here. Both are great options.
Do both if you can, that is what most of my clients do.
529 plans have a lot of benefits, however aren't as flexible as WL plans. Ideally, do a small WL policy, which will serve much more than just saving for college, and do a 529 plan so you get the best of both worlds.
Do both if you can, that is what most of my clients do.
529 plans have a lot of benefits, however aren't as flexible as WL plans. Ideally, do a small WL policy, which will serve much more than just saving for college, and do a 529 plan so you get the best of both worlds.
This post was edited on 7/29/13 at 9:49 am
Posted on 7/29/13 at 10:18 am to Salmon
I've never heard of college planning with life insurance. That sounds ridiculous.
Posted on 7/29/13 at 10:39 am to Broke
Really? They are pretty common. That is all the Gerber college savings plans are. Those aren't very good, but that's another story.
It's an option that has a lot more flexibility with regards to how the funds can be used.
It's an option that has a lot more flexibility with regards to how the funds can be used.
Posted on 7/29/13 at 10:53 am to Broke
It's more for supplemental type things that the 529 doesn't pay for...car, gas, groceries, etc. Highly unlikely to see a life policy fund 5 years of tuition. If your student gets TOPS, scholarships, etc. the 529 is pretty limited in what it provides as you know.
Posted on 7/29/13 at 10:55 am to Salmon
OP, how many years before the funds are needed? How old are your children?
Less than 7-8 years then whole life may not be your best solution.
Less than 7-8 years then whole life may not be your best solution.
Posted on 7/29/13 at 10:55 am to iknowmorethanyou
quote:
the 529 is pretty limited in what it provides as you know.
Qualified college expenses. I got a shitload of those. 529 has worked well.
Posted on 7/29/13 at 10:56 am to iknowmorethanyou
quote:
It's more for supplemental type things that the 529 doesn't pay for...car, gas, groceries, etc. Highly unlikely to see a life policy fund 5 years of tuition. If your student gets TOPS, scholarships, etc. the 529 is pretty limited in what it provides as you know.
Very true, though I have seen some fully fund college (they were pretty big policies though).
Both plans do a good job complimenting each other.
Posted on 7/29/13 at 10:58 am to wasteland
quote:
Less than 7-8 years then whole life may not be your best solution.
Good point.
Posted on 7/29/13 at 11:01 am to Broke
I've got a bushel of clients whose children got scholarships which have caused the 529 balances to remain in place. I guess their grandchildren will use it if they're born stupid.
Posted on 7/29/13 at 11:02 am to wasteland
quote:
How old are your children?
10 weeks
Posted on 7/29/13 at 11:06 am to iknowmorethanyou
quote:
I've got a bushel of clients whose children got scholarships which have caused the 529 balances to remain in place. I guess their grandchildren will use it if they're born stupid.
You ever had the IRS ask you for verification of qualified expenses? Yeah me neither. :distribution:
Posted on 7/29/13 at 11:06 am to Salmon
I did both.. The whole life policy seems to offer more flexibility and some added long term benefits while the 529 offers some added tax benefits.. If I had to pick one, it would probably be the whole policy just for the added protection (the policy itself )
Posted on 7/29/13 at 1:17 pm to TROLA
I'm old school in that insurance should be used for when you die. Not for when you need to fund something. It's fricking crazy expensive. A 529 can be had for about half of the fees associated with a life policy.
Posted on 7/29/13 at 1:22 pm to Broke
quote:
It's fricking crazy expensive
Not on a child.
And it's not that a 529 plan isn't a good idea. They are great. Just that there are other options that can offer additional opitons that may be more beneficial in some cases.
This post was edited on 7/29/13 at 1:28 pm
Posted on 7/29/13 at 1:54 pm to GoCrazyAuburn
I don't buy a car when I need a truck. I don't buy insurance when I need to fund college. That's just me though. I have a hard time believing that the "costs" for the insurance aren't significantly more expensive than a straight fund.
Posted on 7/29/13 at 2:34 pm to Salmon
Dav Ramsey says WL sucks..
Posted on 7/29/13 at 2:34 pm to iknowmorethanyou
quote:
I've got a bushel of clients whose children got scholarships which have caused the 529 balances to remain in place.
From the START website:
[quote]If the beneficiary does not use all or some of the monies in his/her START account, the funds
may be transferred to an account for another beneficiary who is a family member of the original
beneficiary, or the funds may be refunded. If the monies are refunded, the earnings included in
the refunded amount become taxable by the federal and state governments and may be subject to
a 10% (of earnings) penalty tax imposed by the IRS. Monies withdrawn up to the value of
scholarships will not be subject to the 10% additional tax.[quote]
So, worst case scenario, you withdraw the money and pay the taxes that you would have paid in the first place.
Also, at least in La, 529 balances can be used for graduate school.
Posted on 7/29/13 at 2:46 pm to Broke
quote:
I don't buy a car when I need a truck. I don't buy insurance when I need to fund college. That's just me though
Is it just because it is an insurance policy you don't like it, or is it something about the actual benefits you disagree with? If the only reason you ever would buy a life insurance policy is to cover if you die prematurely, that is fine, but arguing the other benefits aren't legitimate for the sole reason it is an insurance policy isn't really a valid stance imo.
quote:
I have a hard time believing that the "costs" for the insurance aren't significantly more expensive than a straight fund.
well, what kind of expenses are you imagining (how much)? it will make this conversation much easier if I know what I'm trying to debate. As a blanket answer though, the cost of the insurance would be higher in the early years as that is when you pay for the insurance, after that the cost is almost non-existent. So the answer is yes and no.
This post was edited on 7/29/13 at 2:47 pm
Posted on 7/29/13 at 2:51 pm to pdubya76
quote:
Dav Ramsey says WL sucks
There was an article back in 07 in NY Times I believe, interviewing Suze Orman about where she had her assets allocated. She was around $25M net worth I believe. She had $1M in the stock market. The rest divided up in real estate/land and municiple bonds for the guaranteed growth (sounds familiar). Yet she still argues for people to load up their 401(k)'s and IRA's with all they got. Why isn't she investing more in the market if her strategies work for everyone???
/rant
As i've said before, I can't stand these one answer fits all recommendations to growing money. It is financially irresponsible.
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