Does purchasing Prepaid make sense at every age?
At Florida Prepaid, you hear us talk a lot about how important it is to save EARLY for college. The longer the runway, the lower your payments. But is it also a wise choice to save for an older child approaching or already in high school?
Certified financial planner Sean Moore, president of SMART College Funding in Boca Raton, and Florida Prepaid College Plan owner, says that there are certainly circumstances when parents should look into purchasing a Prepaid plan for their teenager.
- Your top concern is keeping the money safe. A parent of a 13-year-old who is weighing whether to purchase a Prepaid Plan or begin funding a 529 Savings Plan must consider: What if the market takes a nosedive? Parents who are risk-averse can rest assured knowing that Prepaid Plans are guaranteed by the state of Florida.
“Really, since 2009 the market has done very, very well,” Moore said, “which could drive parents toward only funding a 529 Savings Plan. But market performance is something we can only really know in hindsight. Florida Prepaid is definitely the best bet for someone who needs the safety of locking in tuition prices.”
“Parents who are more risk tolerant – or who can’t afford the monthly payments to start a Prepaid Plan for an older child — could choose to invest in the Florida 529 Savings Plan age-based portfolio, which allocates funds based on student age and risk tolerance, automatically adjusting over time. Anything you can save now, is less debt for your child later.” — Sean Moore, president, SMART College Funding
- You want to lock in Florida in-state tuition rates. If the parent or student moves out of state at some point, the plan will continue as if they never left Florida. That’s great news for families who might move out-of-state but want their child to still have the option to attend a Florida college or university affordably with in-state tuition rates.
“I had a client whose student was a junior in high school and the dad might be transferring to Texas,” Moore recalled. “Because he purchased a Florida Prepaid Plan, he’s now locked-in as an in-state student.”
- You have a fixed payment schedule and amount. Another benefit of Prepaid Plans is that you have a set payment amount. You select the payment option to fit your budget, and you commit to that. With a 529 Savings Plan, if all of a sudden you want a bigger car, or you spend too much at Disney, your $300 a month becomes $200 a month or $100 a month. The set payment for a Prepaid Plan provides the budgetary structure many families find beneficial.”
Fun fact: Your student has 10 years from their projected college enrollment date to use their plan benefits, and any time spent by the student as an active duty member of the U.S. Armed Services will extend the benefit period.