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Is a 529 Plan Right for Your Family to Save for College?

I mentioned in a post previously about the multi-tool and how handy and efficient it is on the farm having one tool that can do many things vrs a tool box with many individual tools that each do one job. A good example of this is the comparison of a 529 plan vrs a high cash value life insurance policy as a savings tool for college. The 529 plan is for one purpose and very limited. If your child decides not go to college and wants to start a business or go to a trade school than you will not be able to use those funds for that and will pay a 10% non-qualified distribution penalty on the earnings plus applicable taxes. It will also affect needs based financial aid as it is listed as an asset counted on the FASFA. Market timing could also be in issue if it is invested in the market during a down turn such as 2008. High cash value life insurance is like the multi-tool in flexibility -It is not listed on the FASFA -Can be used for multiple expenses along the way such as cars, appliances, and anything else planned or unplanned as a great savings vehicle including being used later for tax free retirement income. This is a big one the same dollars that pay for college can pay for your retirement being used over and over again through out your life. -true uninterrupted compound interest even while you use the money it never stops growing. - provides a death benefit to pay for college if you pass prematurely - provides a tax free advance of the death benefit if you get sick and can’t work - consistent growth without the loss of principle or growth. -no penalties for use of any kind at any time. Of course their is no one size fits all magic pill but this sure gives you a lot of flexibility and allows the same dollar to do a lot more jobs at once. Here is a great article from Market Watch on the subject.

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