Additionally, 529 plans have no income limitations or age restrictions. You can start one no matter how much you make or how old the beneficiary may be.
Should your child decide to not attend college, if he or she receives a full scholarship, or if your child wants to attend an unaccredited school, you are usually forced to either transfer the 529 funds to another beneficiary or withdraw them.
If you don’t have another qualified beneficiary, you can pull out the funds, subject to tax penalties. These penalties could be substantial. If you have been able to take state tax deductions, for example, you may wind up getting a bill for back taxes as well as a 10 percent penalty on earnings.
Like most investment funds, the typical 529 savings plans charges a percentage of your investment to cover operating costs. These fees vary from state to state and also depend on whether you purchase your plan directly from your state or buy it through a broker.
Citing a report by Financial Research Corporation, Forbes magazine points out the typical 529 plan offered through a state has an average annual fee of 0.69%. A 529 sold through a broker has an average annual fee of 1.17%.
Explains Forbes, “Although the difference may seem negligible at first, it adds up. If you invested $10,000 over 18 years (assuming you’d get a 6% return), you could have $2,000 less in a 529 plan with a 1.17% fee, compared to a plan that charges 0.69%.”
- Flexibility. 529 distributions must be for "qualified education expenses”. The cash you put into the specially-designed whole life policies like the ones used in Bank on Yourself plans can be used for anything. So, if junior decides to skip college and become an entrepreneur, your BOY policy could be used as seed money to help him realize his dream.
- No impact on financial aid calculations. Unlike other savings vehicles, money you put into a Bank on Yourself policy is not used in determining eligibility for financial aid.
- Liquidity. If you need to, you can borrow from your Bank on Yourself policy and then pay yourself back. You get the interest, instead of a bank. If circumstances ever forced you to skip a Bank on Yourself payment, your credit would not be impacted.
- Safe, sane growth. Since Bank on Yourself plans aren’t tied to the stock market, your money isn’t exposed to the risky business on Wall Street. BOY offers safety and predictability. When you borrow from a Bank on Yourself policy, your money will continue to grow… as if you had never taken out a cent!
- Tax advantages- When you have a professionally-tailored Bank on Yourself plan, your money is generally tax-free. In fact, if you ever have to borrow from the policy, you will pay no fees, penalties, or taxes on that money.
- No limits on how much you can contribute. Bank on Yourself policies can be structured so that you can retain their advantages regardless of how much money you want to contribute.
- Additional peace of mind with the death benefit.
- Control. With most qualified plans, allocation changes can only be done a specific number of times and dates on an annual basis. Having money in a Bank on Yourself plan allows you to remove funds when you come across other attractive investment opportunities. For example, instead of paying college dorm or apartment expenses, if you had enough in your Bank on Yourself policy you could purchase a house or income-producing property where your child could live while they earned their degree.
- Fewer limitations: Most Bank on Yourself BOY plans can be structured to exceed the limits of a 529 plans, and they are not subject to the $350,000 lifetime limit of a 529 plan.
- Beneficiary options: In a 529 plan, investors can change plan beneficiaries without penalty, at any time, and for any reason. However, 529 plans have family beneficiary restrictions. A customized Bank on Yourself plan allows the owner to change the beneficiary to any person, or to a charity, as well as to choose multiple beneficiaries to receive whatever percentage deemed appropriate by the policy owner.