The challenge is how to pay for college without bankrupting your retirement plan or spending all our savings.
Paying for college options:
- 529 plan – many issues
- Pay cash – Lost opportunity costs
- Pay with loans – More lost opportunity costs
- Our plans
#1 Saving in a 529 plan has many disadvantages which normally do not get discussed with the investment advisor.
- The money in the 529 plan will count against any financial aid or scholarship your student receives
- The money is at risk of loss and may not be there when the student is ready for college. Talk to some parents ready to send their children to college in 2008.
- There are high fees within the 529 plan added to the high fees within mutual funds. Wall Street always wins.
#2 Paying with cash – The issue here is the money is gone from your wealth and is now part of the college wealth program. As an example: If you spend $100,000 for a college education then the $100k is not working for you anymore (or never will be). If the $100k had remained in your account (or added to your account) it would have doubled every year at 7.2% (the rule of 72) every 10 years. Therefore, in 10 years you would have $200k, in 20 years $400k and in 30 years $800k. Not having this money in your account to achieve the gains is call lost opportunity costs.
#3 Paying with loans – This option is worse than paying with cash because you lose your principal and now you lose dollars to interest on the loans. Even a greater lost opportunity cost situation!
#4 Our plans have to be custom designed for each family. It is not a one shoe fits all. They provide you:
- Safety of your money – suffer no loss because of an economic or market downturn; yet receive potential of double digit interest credits
- Tax deferred growth with tax free distribution
- Use the money when and how you wish – If the child does not go to college the dollars are not lost or taxed.