Q. I heard life insurance as a 529 plan alternative. Is it a good alternative?
A. In this blog series, we will take a look at these two options for college funding - 529 Plan vs. Whole Life, and analyze each option's strengths and weaknesses.
The Upside of 529 Plan
The traditional college planning begins with a 529 plan. These plans are favored for college planning for a few reasons:
While a 529 Plan offers some powerful tax-based benefits, it also has some limitations and disadvantages.
A. In this blog series, we will take a look at these two options for college funding - 529 Plan vs. Whole Life, and analyze each option's strengths and weaknesses.
The Upside of 529 Plan
The traditional college planning begins with a 529 plan. These plans are favored for college planning for a few reasons:
- Contributions are made on a Federal tax-basis
- Earnings grow tax-deferred
- Withdrawals out of the plan are tax-free on Federal, and most if not all states taxes, as long as the fund is for qualified education expenses
- Some states also offer state income tax deduction on plan contributions, with an upper limit per year
- Funds in a 529 plan can be tied to market return
While a 529 Plan offers some powerful tax-based benefits, it also has some limitations and disadvantages.
RSS Feed
