The Hidden Dangers of a 529 College Plan

There's a hidden danger in college 529 plans, and many parents don't even realize it.

It's a wonderful thing to be able to help your child achieve a college education. But there's a smarter way to do it that doesn't put your financial future at risk. Let's take a closer look at what you might be missing out on with a 529 plan.

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The Danger of a 529 Plan

It's natural to want the best for your child. For many parents, this includes a college education. But it's not a good idea to forget about yourself and your needs. Let's say you open a 529 account and put as much into it as you can. What happens when you send your child off to school and then have to look at the near-empty retirement account you've tried to build in the meantime?

The number one danger of a 529 plan is that it takes focus away from your retirement needs. Your child has other options for college financial aid, including loans, grants, and scholarships. You don't have any other options for funding your retirement.

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Paying for College without Sabotaging Your Retirement

Permanent life insurance offers a more complete financial solution than a 529 account. You can get:

• the complete financial protection of life insurance
• cash that can be used to help fund your child's tuition
• cash that can be used to help pay for non-529-approved expenses such as housing, food, and transportation
• the flexibility to use that money to supplement your retirement

When your permanent life insurance cash value account grows, there's no limit to what you can do with it. Unlike 529 plan rules, your cash value has no rules. Use it to pay your child's tuition, or their room and board. Use it to buy them a used car so they can come home once in a while. Use it to help them start a small business, if they decide not to go to college. Use it to remodel the house if they decide they don't want to start a small business. Or pull from your cash value during retirement to help supplement your other streams of income.

The bottom line is that you're protected, no matter what. Should something happen to you, your child's 529 account won't grow. It needs contributions to do that, and you need to be around to make them. However, if something happens to you, life insurance pays a death benefit that's tax-free. Your child will still be able to go to school and strive for his or her dreams. That policy will pay out, no matter what. A 529 account simply cannot match those kinds of benefits.

Of course, you should never overlook the #1 reason for buying a life insurance policy: the financial security and peace of mind it brings your loved ones.

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