Which are the best options to Save for College?
529 PLAN VS PERMANENT LIFE INSURANCE
This is a question that us parents ask ourselves when we want to decide on our children’s future. Some parents always said: “I don’t know if my kid will go to college”, “I’m successful and I only have a high school diploma”, “I don’t want to put life insurance on my kid”, etc. But at the end of the day, it all depends on your financial goals and obligations, as well as the degree of flexibility you’re after. Both financial vehicles on top will help you save for future college costs, which climbs every year. Life insurance is exactly that: insurance black and white. It protects your family in the long run, but Permanent life insurance offers the flexibility to withdraw accumulated value inside the policy during your lifetime to pay for things like loans, college cost, house down payments, business credit lines, and for some people can be used as a retirement product.
To make a hypothetical decision, why we don’t think about these factors:
- Income limits
- Tax breaks
- Investment returns
- Flexibility with funds
- Withdrawing cash
- Financial aid
The question now is can I buy or invest in both Permanent life insurance and a 529 plan? The answer is Yes, because while the 529 plan can only be used for education without having to pay fees and taxes; Permanent life insurance is more flexible as mentioned before, and our recommendations always as financial advisors are to diversify since we don’t want our children to feel obligated to go to college because that’s the only financial vehicle that we decided early in their lives. This life insurance vehicle gives you the availability to use the accumulated value for whatever you want, so bottom line, if you have financial obligations outside of college costs such as paying for expenses like travel, computers, insurance, or housing more than the university, stated prices with 529 assets creates taxable consequences plus penalties. Life insurance faces no limitation to “qualified expenses.”
The five reasons why I belief Permanent life insurance its better than 529 plans:
- Permanent Life Insurance Requires No Qualified Expenses
- Permanent Life Insurance has no Contribution Cap
- Permanent Life Insurance does not Count Towards Expected Family Contribution
- Permanent Life Insurance Offers a Bullet Proof Plan against Premature Death
- Permanent Life Insurance is not Correlated to the Market and Economy
Bottom line 529 plans and life insurance policies have a long list of benefits. The best savings strategy for you is the one that fits your financial situation and goals. If you’re interested in only paying for college costs, a simple 529 plan might make more sense for your family. But if you’re looking for flexibility with your funds and diversifying your business (family) permanent life insurance makes more sense.
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