subject: Become Your Own Bank: Fund College or Fund Retirement? [print this page] Become Your Own Bank: Fund College or Fund Retirement?
When I sit down with my clients, many times they ask me what they should fund: college education or retirement. Because our "traditional" methods of saving lock away our money, we often have to make this difficult decision because we cannot always afford to do both. In the past, I have always advised my clients to fund their retirement because many things could happen between now and when their children would be going away to school: They could decide not to go to college, they could get scholarships, or they may decide to forgo college and form their own rock n' roll band to tour the world. Well let me tell you that there is a better way to fund both of these, and that way is through the use of the Infinite Banking Concept.
In the past, "responsible" parents put off their own retirement savings to plan for their kid's future by funding a 529 plan and, despite the advantages of having some state tax-breaks, the 529 plan is held down by many restrictions one being its sole use funding only college education. So if your child decides not to go to school at all, you could assign the account to a different beneficiary, or you, yourself, could go back to school, but remember that the 529 plan serves its purpose for college education funding, so if you do decide to take money out of your account you will be subject to a 10% penalty and income tax on the growth part of the withdrawal.
So, if college is definitely in the picture and your child applies for loans, grants, and/or scholarships, the money that you have been diligently putting away could be used against you when you try to qualify for this assistance. So while a 529 plan may serve as a viable option in saving for your child's college education, it does have some disadvantages that do make it unattractive compared to other methods of the same related matter.
Other than the 529 plan, there are other additional ways to fund college education; UTMA's, home equity loans, and loans/withdrawals from qualified plans are just a few, but there are many rules and formulas that you have to be aware of with these to make sure that you are maximizing the amount of financial aid your child is eligible to receive while still not wasting away any of your own personal savings.
So what if I told you that there was a way to be able to fund both your kid's education AND your retirement, all while having full use and liquidity for today's needs and wants without any tax implications? What if those funds did NOT count against you when your son or daughter applies for financial aid; What if you didn't even have to legally disclose it on the forms?
"Becoming your own bank" through the Infinite Banking Concept is a proven strategy that will allow you to do all of the above and then some! You can fund your "bank" for the purpose of either college education or retirement, and at the same time be able to use it for both. In fact, you can use it for many other things as well. Need a new car? Need a new refrigerator, or just need a vacation? The more you borrow from your "bank", utilizing the concept, the more your "bank" will grow. There are already guarantees built into your growth, but borrowing and paying it back (with interest) take it to a much higher level.
Just think of how a bank earns money. It is not from your deposits. It is from loaning out its money. The same applies to your own "bank". You begin to capitalize on your own bank until it is time for your child to go to college. If they receive any scholarships, loans or grants, that's great. You have use of your money for other needs for at least the next year. Of course, you need to treat yourself with the same respect that you give to the banks, and pay yourself back on any loans that you borrow at the same interest rate you would have already been paying to an outside financial entity. If your child does not receive any financial assistance, the money is there for you to use (borrow). Either way, by loaning yourself the money to pay for college and paying it back at a current interest rate, you will surely enhance your long-term retirement funds. If your child decides to not go to college, guess whose going to have use of it for their retirement? YOU! In the meantime, you can use it to loan to yourself for current needs you would otherwise take out a loan for, or put on a credit card.
If you were in a 529 plan, you would not be able to access this money unless you wanted to pay taxes and penalties. In addition, you would have to use the money in your 529 plan before you qualify for financial aid. Having your money tied up in these plans, as well as your typical qualified retirement plans, could force you into a financing need from a bank or credit card when that need arises for a new car, refrigerator, or a nice vacation.
So set up your own bank today and learn why the "Infinite Banking System" is the right way towards a successful and bright financial future.
