Why 529 Savings Plans Are Losing Their Cool

You’d think that with the ever growing importance of a college education – combined with wildly escalating tuition prices – the popularity and reliance on 529 College Savings Plans would increase as well.

Not so.

According to a recent article

“Assets in 529 college savings plans (which differ from 529 prepaid tuition plans) fell from a record high in the first quarter to $157.5 billion in the second quarter – a 0.5 percent decrease, according to Financial Research Corp. (FRC) in Boston. In the third quarter of 2011, net inflows were negative – more funds flowed out than flowed in – the first time that happened since the middle of the Great Recession. In the first half of this year, net inflows were nearly 7 percent below the same period last year and about 60 percent below The second quarter’s $2.9 billion in net inflows (contributions minus withdrawals) were 12 percent lower than they were a year earlier, and down nearly half from their prerecession heyday in the mid-2000s.” 

When you think about it, a lot of things that were in their heyday in the mid-2000s are not anymore. 

Less than a decade later, we’re living in a very different world. And more and more people are starting to realize that the “Emperor (529 Plans) has no clothes.”  

That and they are also realizing that cash value life insurance as a college savings tool is a better option… 

One of those people, according to the article, is a former stock broker Brian Solik. Given his trade, if anyone would know firsthand that we’re not living in the mid-2000s anymore, it’s him. 

After the stock market crash in 2008, he stopped contributing to the three 529 plans for his children and instead began using cash value life insurance for college savings. 

His reason – no surprise – was safety. 

Taking a hit to your investment portfolio is one thing. You have to expect that to a certain degree. 

But when your children’s college savings starts losing value, it’s time to rethink your strategy. 

And with the college savings public growing more leery of 529 plans, this is your chance to make a lasting, positive impact on a prospect or client’s financial future. 

As you know, cash value life insurance is structured much simpler than a 529 college savings plan. 

However, the challenge I pose to you is convincing prospects and clients that cash value life insurance is simpler and safer. 

You can start by addressing the topic head on. 

Ask prospects and clients if their 529 plans are working out for them as well as they originally thought they would. 

Ask them if they have a college savings plans for their children. Ask them if they are aware of any other options than 529 plans. 

The best among us can pare down a financial plan’s important concepts and benefits. But that’s only half of it. 

The difference maker is contrast – clear, concise contrast between 529 savings plans and cash value life insurance. 

Focus on the outcome of the latter’s benefits. Make them tangible. Put them in dollar figures, and show what those dollar figures can afford.  

Then show how these benefits can affordably put their children through college without the floor falling out of their retirement savings.

Be valuable. 

John McCarthy
Managing Editor, Leads4Insurance.com

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