Gerber Life Vs. Bank Saving Account

[stackz]

So my fiance and I have been talking about saving up for our 2 year old boy.  I've been researching and narrowed it down to the Gerber Life College Plan and a bank savings account. Does anybody on here already have a bank account set up or are on the Gerber plan? If so, what are the pros and cons or everything. I'm new to the game. Any info would be appreciated. 

 

[crcballer55]

Both are terrible ideas.  The Gerber college plan is just an annuity that's meant for college.  Meaning, they invest your money in the stock market with the expectation that it will meet the historical average of 10% growth per year over the long run.  Since they are guaranteeing you a "safe return" they're going to take several percentage points off of that (typically 3-4%) which can mean the difference between their dream college and the one down the street while they live in your house.  Those kinds of plans are really pitched for risk adverse people.  Keep in mind though, the market has never lost money over a 15 year period and this last 10 year period was the first in history that it went negative.

A bank savings account is even worse.  You're basically capped out at about 5% (in good times) unless inflation kicks in like the early 80's.  Right now, a good online account will make you about 1% and you may be taxed at your interest rate unless it's set up as a beneficiary account.

Stick with a normal 529 plan with a financial adviser who has a long history of success (10+ yrs)

 

[antbanks81]

I looked into the Gerber plan, and I JUST SAID NO! I believe I can do much better on my own investing in real estate.

 

[stackz]

Originally Posted by crcballer55

Both are terrible ideas.  The Gerber college plan is just an annuity that's meant for college.  Meaning, they invest your money in the stock market with the expectation that it will meet the historical average of 10% growth per year over the long run.  Since they are guaranteeing you a "safe return" they're going to take several percentage points off of that (typically 3-4%) which can mean the difference between their dream college and the one down the street while they live in your house.  Those kinds of plans are really pitched for risk adverse people.  Keep in mind though, the market has never lost money over a 15 year period and this last 10 year period was the first in history that it went negative.

A bank savings account is even worse.  You're basically capped out at about 5% (in good times) unless inflation kicks in like the early 80's.  Right now, a good online account will make you about 1% and you may be taxed at your interest rate unless it's set up as a beneficiary account.

Stick with a normal 529 plan with a financial adviser who has a long history of success (10+ yrs)

Thanks. Much appreciated man.

 

[crcballer55]

Originally Posted by stackz

Originally Posted by crcballer55

Both are terrible ideas.  The Gerber college plan is just an annuity that's meant for college.  Meaning, they invest your money in the stock market with the expectation that it will meet the historical average of 10% growth per year over the long run.  Since they are guaranteeing you a "safe return" they're going to take several percentage points off of that (typically 3-4%) which can mean the difference between their dream college and the one down the street while they live in your house.  Those kinds of plans are really pitched for risk adverse people.  Keep in mind though, the market has never lost money over a 15 year period and this last 10 year period was the first in history that it went negative.

A bank savings account is even worse.  You're basically capped out at about 5% (in good times) unless inflation kicks in like the early 80's.  Right now, a good online account will make you about 1% and you may be taxed at your interest rate unless it's set up as a beneficiary account.

Stick with a normal 529 plan with a financial adviser who has a long history of success (10+ yrs)

Thanks. Much appreciated man.

Since you're looking, if you're thinking about Gerber Life for insurance, just forget it.  Annuities are something you should stay completely away from unless you want guaranteed growth after you're in retirement and want to avoid volatility.  Get a policy for yourself equivilent to about 10 yrs. of your pay and just get a rider for your kid to cover any burial expenses should the worst case scenario happen.

I'm probably stretching it a little bit, but something to keep in mind

 

[Kimchi Papi]

I'll cosign with crcballer55. 529 plan would be best. Here's a simple overview of a 529 plan...

http://money.howstuffworks.com/personal-finance/college-planning/financial-aid/529.htm