Why choose a 529 over WL?

[James]

Can anyone give me a good reason why 529's are preferred by some over a WL Contract?

Tonight this guy tells me how great the recommended plan by the State of Tennessee is! Here is the prospectus, http://www.tnbest.org/pdf/tn_discl.pdf

Now he goes on and tells me how no Insurance Carrier has a right to be used in College funding, they don't pay enough interest? So I ask him why he choose TIAA then? Well, the appointment really didn't go good from the get go, win some loose some!

Ps, by the way I don't do college planning, I'm still wondering how this occured? I'm thinking the guy was just looking to be contrary and, this is the first thing that he thought about since he recently open this account, I guess?

 

[CHUMPS FROM OXFORD]

There are some good 529s out there (I am not particularly fond of Ohio's Putnam setup).

Money grows tax-free and other than the usual expenses, all of the funds are invested.

A WL policy is a different animal. Some advantages, but normally not my choice.

 

[James]

There are some good 529s out there (I am not particularly fond of Ohio's Vanguard setup).

Money grows tax-free and other than the usual expenses, all of the funds are invested.

A WL policy is a different animal. Some advantages, but normally not my choice.

Yea, I was thinking of one for my boy but, all that I have found here in Tennessee really sucks. Plus, the WL I have does have a DB if anything happens to me, so far I find little reason why a 529 is better, IMHO. Plus what happens if the child for some reason get a full educational scholarship? I guess my dislike for the restrictions of qualified plans are showing yet, the 529 is just over restricted.

Plus what kind of return can a person expect from a 529?

 

[CHUMPS FROM OXFORD]

Remember...you can go outside of your state. You'll just lose the state deduction.

Returns have consistently outperformed wl policies, assuming you money is in equities.

Re the db...you are very unlikely to use that rider, based on the type of work you do.

Each situation is different, but in most cases, the 529 is the best fit.

 

[James]

Remember...you can go outside of your state. You'll just lose the state deduction.

Returns have consistently outperformed wl policies, assuming you money is in equities.

Re the db...you are very unlikely to use that rider, based on the type of work you do.

Each situation is different, but in most cases, the 529 is the best fit.

Now I'm going have to challenge some of this, most do not use equities to secure their child's education. If they do, it is highly advise they move more money as the child ages to the safe mode that I'm finding is paying around 3.5-5%. Now my child is 10, if I was to use a 529 what can I expect from my equities in the next few years? I would likely be a tad nervous personally.

Plus the insurance cost of the ryder is not free, nor are the administation charges of the 529, add in the restrictions and the what if, of the child not going to college or getting a free ride for various of reasons. Now we add in the strategy of financial aid which is basically built into the funding of higher education. Is the funds of the 529 counted against the ability to apply for financial aid?

So I'll ask again, I know I'm a bit dumb, what should a person expect in the returns of a 529 since many IMHO would be conservative investment strategy in the regards of their child/children education.

Most good PWL is paying around 6-8%, okay if the economy gets rocky or less robust then in the previous 20 years I can see that going down a few points. Yet, so will equities. Come on now, I know there has to be a report somewhere that is showing expected or average returns people get from 529 plans? I don't promote or involved myself but, just wondering about this strategy.

 

[bluemarlin08]

How can a PWL pay 6-8% on invested premiums when their investment strategy is conservative debt instruments that are yielding much less than the 6-8.
I have a child at UTK, and went through the financial aid process last year. From what I could determine, more emphasis seemed to be placed on AGI versus assets. Best type of planning I give to clients is instill in their children the importance of good grades, over 3.4 GPA, taking honors courses as well as dual enrollment college courses. My daughter graduated from HS with 18 hours of college credit. High ACT scores, excess of 27, high GPA, can almost get your child a full ride in college. We received the majority of tuition in grants and scholarships.

 

[CHUMPS FROM OXFORD]

"what should a person expect in the returns of a 529 "

Unfortunately, there is not an answer since the return depends on how your money is invested, and market conditions.

Also, remember that YOU control the funds you invest in.

My ROR has been a hair over 10%, but my situation may be entirely different than yours.


A PWL generally does not earn 8% after you factor in the loads and the premium (ST and IT).

No clear answer here. If you sleep easy with your decision, then it was the right one.


NOTE: THE STATEMENTS I MADE WERE REGARDING MY PERSONAL 529 PLAN AND SHOULD NOT BE CONSTRUED AS ADVICE OR A RECOMENDATON FOR ANYONE READING THIS.

 

[CHUMPS FROM OXFORD]

Just saw that your child is 10. No way would I use a wl policy.

 

[LGilmore]

Situations will vary making one or the other the best choice. However, when you run across someone who isn't open to an idea and willing to compare... walk away..your time is better spent elsewhere.

 

[GreenSky]

Most good PWL is paying around 6-8%

Are you suggesting that if the total premium on a PWL is $10,000, then the annual dollar return is $600-800 compounded? I had no idea it was such a good investment.

However, if the return is based solely on the cash value, then you must take the cost of the insurance as part of the "investment."

Sorry for my ignorance. I'm a health guy who knows how to quote term life.

Rick