June 11, 2025 • 25 mins
What happens when your child's college fund becomes a business opportunity fund, or neither?
Most business owners feel trapped by a painful dilemma: save for their kids' education in accounts they can't touch, or keep capital available for business opportunities. But what if this choice is based on outdated assumptions about how education and entrepreneurship actually work?
In this episode, we explore why traditional college savings can backfire for business families, and reveal a flexible strategy that prepares your children for success whether they choose Harvard, trade school, entrepreneurship, or paths not yet invented.
Key Quote: "I was saving for the future I thought my kids should have, instead of preparing them for the future they might actually want."
What You'll Discover:
- Why 529 plans can trap business owners when opportunities arise (and what happened to the agency owner who missed a $200K acquisition)
- The hidden FAFSA impact most business owners don't know about their college savings
- How the SECURE 2.0 Act creates new options for unused 529 funds (plus the gotchas to watch for)
- A real strategy that funded both college tuition AND business growth during COVID
- Why teaching kids about money might be more valuable than giving them money
Perfect for: Business owners torn between funding their children's future and maintaining capital flexibility for business growth, plus parents questioning whether traditional college savings fit their entrepreneurial family's reality.
Listen now to discover how education funding for business families should actually work in an unpredictable world.
Ready to evaluate your education funding strategy? Check out this week's Wealthy Wednesday for the Business Owner's College Funding Flexibility Guide mentioned in the episode.
Interested in our Freedom Retreat? Text Freedom to 513-447-6501 to start the application process.
00:00 Introduction: The College Savings Dilemma
00:50 Welcome to Wealth Wisdom Financial Podcast
01:41 The Challenge of College Savings for Business Owners
01:56 Carlos' Story: A Business Owner's Dilemma
05:17 The Changing Landscape of Higher Education
06:14 Sarah's Story: Missed Opportunities
08:16 Introducing the Bank on Yourself Strategy
08:24 Marcus' Story: Flexibility in Education Funding
09:26 The Benefits of a Flexible Financial Strategy
10:31 Common Objections and Recent Law Changes
16:35 Elena's Story: Adapting to Uncertain Times
19:57 Conclusion: A New Approach to Education Funding
23:17 Special Announcement: Freedom Retreat for Business Owners
Watch on YouTube here: https://youtu.be/AS6VJqZIsEI
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:01):
Quote I've been saving in a 529
plan for years, but now my daughter says
she doesn't want to go to college. End
Quote. That's what Jennifer told me with
a frustration in her voice that I didn't
really get across there. Today, we're
going to tackle the college savings
dilemma that's keeping business owners up
at night, like Jennifer, and revealing a
(00:24):
flexible strategy that works whether your
kids choose to go to Harvard, trade
school, or join you in your business.
Here we go.
In a world where chaos seems to reign
supreme, where uncertainty lurks around
every corner and financial markets are
now more unpredictable than ever. There's
(00:46):
one place you can turn to to find clarity
and control. Welcome to the Wealth Wisdom
Financial Podcast. Hey, I'm Brandon.
And I'm Amanda. Join us as we dive deep
in the world of personal and business
finance to assist you in navigating
through the chaos and building the
financial future you deserve. We believe
(01:06):
when conventional financial thinking
doesn't get you where you want to go, you
need wealth wisdom. So if you're ready to
take control of your financial destiny.
Tune in to the Wealth Wisdom Financial
Podcast because in a chaotic world,
your money shouldn't be. Subscribe
now and never miss an episode.
(01:28):
Now, before we dive in, I got to give you
a heads up. We're going to be sharing
something at the end of the episode that
you're going to want to stay tuned for an
amazing opportunity to level up
your financial freedom journey. For
now, we're going to jump into this topic
of the challenge that many business
owners face. Save for college
(01:49):
or keep money invested in the business.
How do you, you know, detract from your
kids' college?How do you, all the things,
right?I want to introduce you first to
Carlos. Carlos is a successful plumbing
contractor, has three kids, 8, 11, and
14. So not exactly in college yet, but
young enough that he's starting to think
about it, right?He built his business
(02:09):
from the ground up over the past decade,
growing from a one-man operation to a
team of 15 technicians
serving three different counties in a
metropolitan area. Carlos
has always prioritized his children's
future. Like many parents, he opened
529 college savings plans for each child
shortly after they were born. Every month,
(02:33):
He faithfully contributes to these
accounts, watching the balances grow, and
feeling confident he's setting his kids
up for success. And he feels pretty
good about the tax deduction he gets for
doing that too. But recently, his
oldest, Miguel, started
showing incredible aptitude in
the family business. At 14, he's already
(02:54):
helping with simple jobs on weekends and
talking about getting his contractor's
license as soon as he's old enough to be
eligible for it. He told his dad one
night, Dad, what if I want to take
over the family business instead of going
to college?That question
stopped Carlos in his tracks. He's been
saving diligently in accounts specially
(03:16):
designed for college expenses since
Miguel was born. Miguel's 14 now. That's
many months, many contributions. If
Miguel chose a different path, those
funds would either go unused or face
penalties and taxes if withdrawn for
non-qualified expenses. At the same
time, Carlos was eyeing this
opportunity to expand his business into a
(03:38):
fourth county that would require
about $150,000 in capital to to
open up a business there. Some of that
money was, of course, sitting in his
children's 529 plans, inaccessible
without penalties, unless it was used
only for education, Carlos told me.
I realized I'd backed myself into a
corner. I was saving for a specific
(04:00):
version of my kid's future that might not
happen. I'm restricting capital that
could grow my business in the process.
Carla's situation highlights a
fundamental challenge for business owners
planning for their children's college
education. The traditional college
savings advice we hear everywhere
assumes a predictable path to a four-year
(04:21):
degree. Maybe an advanced degree, but at
least a four-year degree. It also assumes
college is going to look the same in 5,
10, 15 years as it does today. And it
assumes that locking away your money
where you can't touch it is
acceptable for qualified educational
experience. That's the best approach. But
those assumptions don't match the reality
(04:43):
of raising children and running a
business in today's rapidly changing
world. Carlos's story points to a
critical truth. Business owners
needCollege funding strategies that
are as flexible and adaptable as the
business owner is, right?You know, as a
business owner, you got to be flexible.
You got to be adaptable that your college
(05:05):
funding strategy needs to be as well. The
traditional approach to college saving
simply doesn't fit the entrepreneurial
lifestyle and or the uncertain future of
education. Let's first think about what's
happening in higher education right now.
We're not going to get political here,
but like these are things that have been
happening, you know, moving in this
(05:25):
direction for decades. Traditional
four-year degrees have been facing
unprecedented challenges since probably
before I got my college degree 20 years
ago. Skyrocketing costs that
outplace inflation, employers
increasingly valuing skills over degrees,
the rise of alternative educational paths
(05:46):
liketrade schools, coding boot camps,
digital credentials, the growing burden
of student loan debt, and you know
parents, if we want our kids to have that
same debt that we ended up with at the
end of it. Add those
concerns to the unique situation of
business owner families, where children
might want to join the family business,
(06:06):
start their own venture, or pursue
specialized training that doesn't fit
their traditional college model. Let's
get positive here, let me tell you about
Sarah. Sarah runs an
agency, and for years, she diligently
funded 529 plans for her twin daughters.
When they turned 16, she'd
accumulated $180,000 in
(06:28):
her 529 accounts for her twins.
Wow, holy cow, amazing for them.
Then an unexpected opportunity arose.
A competitor was selling their client
list and proprietary market research
database. at a significant discount due
to the owner's health issues. That owner
was much older, they're having some
(06:48):
health issues, they wanted to sell the
assets of the business, and the asking
price was $200,000, a bargain
considering the potential return. Sarah
found herself with a difficult choice.
She had enough money in her business
reservoir to cover half of the cost.
So of the 200,000, she had about 100,000,
(07:08):
you know, in her six-month emergency
fund, like she was taught to do. Where
was the other 100,000 going to come from?
Well, you know money on her balance sheet
was what's sitting in her daughter's 529
plans. And that money would face lots of
taxes and penalties if it was used for
anything other than qualified education
expenses. So Sarah passed on the
opportunity, choosing to preserve her
(07:29):
daughter's college funds. Then six months
later, the girls were about 16 and 1/2,
about to turn 17, they announced they had
different plans. One wanted to
attend a trade school for medical coding,
which would cost far less than
traditional college. The other one to
travel and build her photography
portfolio. Sarah was now looking at
(07:50):
significant money trapped in 529
plans that would either go unused or be
withdrawn with penalties.
Meanwhile, the competitor who had
approached her and sold the assets of the
business, sold it to another agency that
now presents serious competition in her
market. Sarah was trying to do the right
thing. but she ended up restricting her
(08:10):
business growth while saving for a future
her daughters didn't even want. This
is where the Bank On Yourself strategy
offers a compelling alternative. Before I
explain what it is, let me tell you about
Marcus and his family. Marcus runs a
growing landscaping business and has two
kids. Rather than putting all his
education savings into a 529, he
(08:32):
structured a Bank On Yourself type policy
that built cash value his family could
access for any purpose,Not just
education. When his son decided to attend
a traditional university, Marcus was able
to take a tax-free policy loan to help
cover the costs. And when his daughter
decided she wanted to buy a lawn care
franchise instead of attending college,
(08:54):
he was able to help her with that too,
using the same funds without penalties or
restrictions. The most powerful part?
Before any of this, Marcus had already
used the policy's cash value as a
financing tool for his business, taking
out loans against it to purchase
equipment during peak seasons, repaying
those loans during his high cashflow
(09:14):
months. This education
funding strategy actually strengthened
his business while his kids were growing
until they were ready for their adulting
time, rather than competing with it. This
is a paradigm shift that successful
business owners are making, moving from
rigid, single-purpose education
accounts to financial strategies that
(09:34):
support both the children's futures and
their business growth, whatever form they
may take. And I'm not preaching here.
I'm actually sharing what we really do.
Full disclosure, our son does not have a
529 plan or any other kind of
government-sponsored college savings
fund. We're preparing in other ways, and
we love to call the funds that we're
(09:56):
setting aside for his future his adulting
fund, rather than just a college fund.
We also firmly believe that teaching him
about how money works is more valuable
than giving him money. So far, he doesn't
get an allowance, but he does get a
weekly investing club time slot on my
calendar. that will pay dividends for the
(10:17):
rest of his life and maybe into future
generations, right?His children and
grandchildren, as he follows our model
and invests in their education with
teaching them how money really works and
how to use it in their favor. What better
gift to give your kids, right?Now, stay
tuned after the break where we'll talk
about some common objections, some recent
law changes that might have you thinking
twice about whole life insurance versus
(10:39):
529s.
Ready to take the next step towards
securing your financial future?Whether
you're planning for retirement, saving
for your dream home, or you just want to
make your money work harder for you, the
team at Wealth Wisdom Financial are ready
(11:00):
to assist you. And now it's easier than
ever to see how we might give you a boost
on your financial journey. Schedule a 15
minute discovery call with one of us
today. And let's discuss your questions
and your financial goals together. Don't
wait any longer. Your financial freedom
awaits. Schedule your discovery call at
www.wealthwisdomfp.com/call.
(11:29):
I mentioned the first story, the
tax advantages of the 520 nines. And if
you do move, you know there's there's
different tax advantages for bank and
yourself type whole life policies, but
you don't get a tax deduction in the
current year, at least under current law.
And it's a valid point, right?529s
offer a tax-free, you get a tax deduction
(11:51):
now, tax-free growth, as long as you
follow all the rules and everything, and
as long as you use it for qualified
educational expenses. But this benefit
can actually become a significant
restriction. that can be particularly
problematic for business owners. First,
there's the issue of flexibility. If your
child chooses not to attend college or
needs less than you saved, you face
(12:11):
taxes, 10% penalty on earnings for
non-qualified withdrawals. You can change
beneficiaries to another family member,
but that doesn't help if you need those
funds for your business. Second, there's
the opportunity cost. Money locked up in
a 529 can't be used to fund business
growth,Manage cash flow, seize
opportunities, those kind of things for
business owners, the return on capital
(12:33):
invested in their business. often far
exceeds what they might earn in the 529
plan. So just think, the taxes that you
saved, the taxes that you're saving as it
grows, um if you added those up, could
you actually make more money in your
business if that money was working there?
Then there's the dun, dun, dun, the
FAFSA impact. The FAFSA is the Free
(12:55):
Application for Federal Student Aid. Many
business owners don't realize that 529
plans owned by parents count as
assets on the FAFSA. potentially reducing
eligibility for financial aid. In
contrast, cash value life insurance is
not counted as an asset on the FAFSA
under current rules. Now,
(13:16):
we get to talk about something that I'm
I'm sure those of you who keep up to date
on the latest law changes have been
thinking this whole time and waiting for
me to address. There's been some exciting
news for families worried about having
money stuck in 529 plans.
Thanks to SECURE 2.0 Act that took
effect in 2024, there's now another
option for taking unused 529
(13:37):
funds. Beneficiaries can roll over
up to 35,000 from their
529 plan into a Roth IRA in their
name without any kind of taxes or
penalties. Let me give you an example.
Diego. Diego's parents saved in a
529 plan starting when he was born.
After graduating with minimal student
(13:58):
debt thanks to scholarships, Diego had
still had about 50,000 left in his 529
plan. Since the account had been opened
for at least 15 years, Diego was
able to start rolling funds into the Roth
IRA up to 7000 per
year based on current contribution
limits. And as long as he had earned
income matching those amounts, it's not
(14:21):
like he could just take 50,000 and roll
it over. He had to do 7000 per year as
long as he was actively working and was
making at least 7000. Now sure,
this gave him a a good head start on
retirement savings while avoiding taxes
and penalties that would have come from
non-qualified withdrawals. But remember,
there's important requirements. The 529
(14:41):
had to be open for at least 15 years.
Contributions made within the five last
five years are not eligible to be moved,
so you have to be very careful which
money it was moving and when. And there's
a limit of $35,000. That's a
lifetime limit. So the 50,000 Diego
had, he could only move 35,000 of it,
leaving 15,000 in the 529 still to figure
(15:02):
out what to do with. That can be a safety
net for families concerned about over
funding 529 plans, right?If you got a
whole bunch of money there, hopefully
gives you a little bit of peace. The
other part of this is it let's say Diego
makes lots of money. He's not limited
by normal income limits and can still do
that rollover. So if your child becomes a
high earner who would normally be phased
(15:23):
out of Roth eligibility, they can still
benefit from this rollover from 529 to
Roth IRA feature. But here's the
big gotcha. While Diego will not be
able to roll over the entire amount that
you know he has 50,000, but the lifetime
limit's thirty-five. He'll also have to
worry about the restrictions of the Roth
IRA account. He'll have 35,000 that
hopefully is growing, but all of that
(15:45):
money gets locked up until he's 59 1/2
years old. Even if he wants to, you know,
if anytime he wants to use it, he can't
without taxes or penalties. Now, Can you
imagine all the things Diego could use
from age 22 to age 60 with
that 30,000?If he was able to borrow
against it, refill it without
interrupting his compounding, which gift
(16:06):
would you like to give your children?We'd
be remiss not to mention one more thing.
Be sure to check with your tax pro about
how a 529 to Roth IRA rollover is
treated in regard to state taxation.
This is such a new option, right?It just
became a thing in 2024
that a lot of states haven't given
clarity here and needed to check what are
(16:27):
the rules in your state. Okay,
almost done here. Just one more story
that helps highlight these issues.
For here, for this one we're going to
talk about Elena. Elena owns a successful
bakery with two locations. When her
daughters were born, Elena's financial
advisor recommended maxing out a 529
plan, which she did for several years.
(16:49):
But when an opportunity came to open a
third location in a prime spot, Elena
found herself cash strapped, despite
having significant savings in her
daughter's 529 plans. She learnedBut
think on yourself and decided to redirect
her saving education saving strategy over
the next seven years, she built up
substantial cash value and a properly
designed policy. And then, when her
(17:11):
daughter got accepted to her dream school
Elena was able to take tax free policy
loans to help her cover the cost. But
here's where the story gets interesting
during her daughter's sophomore year. The
COVID-19 pandemic hit, forcing her bakery
to temporarily close its dining areas.
While many competitors struggled to stay
afloat, Elena was able to access her
(17:32):
policies cash value to pivot her business
model to delivery and takeout,
install some new safety equipment, and
even retain all of her staff. Elena
told me that money saved both my business
and my daughter's education. If it had
all been in the 529 plan, I might have
had to choose between keeping my business
(17:53):
afloat and keeping her in school. The
Bank on Yourself strategy provided Elena
with something 529 plans simply can't
offer options. We all love options,
and as business owners navigating
uncertain times while trying to secure
our children's financial futures, options
are invaluable. They're kind of
(18:13):
like that American Express commercial,
right?Like 529 plan this much. Bank on
yourself strategy this much. Options,
priceless, right?Now it's worth noting
that banking yourself isn't an all or
nothing proposition. Many of the business
owners we work with use a combination of
these strategies. keeping perhaps keeping
some money in 529 plans, maybe what the
grandparents give, you know, those kind
(18:34):
of things, while directing a bulk of
their college education savings
toward more flexible vehicles like a
properly structured Bank On Yourself type
policy. For example, one thing
that some parents use the 529 for still
is for K through 12 private education
that helps with tax deductions for
current year or next year's tuition and
(18:55):
compliments really well what they're
doing with Bank On Yourself. The keyis
finding the right strategy for your
specific situation, one that acknowledges
the unpredictable nature of both business
and education in the coming decades.
Let's talk about that future for a
minute. The landscape of higher education
is changing rapidly. We talked a little
(19:15):
bit about this before, but just consider
these trends. The rise of online degrees
and credentials from prestigious
universities. Employers like Google,
Apple, IBM creating their own
certification programs. The growth of
income share agreements as an alternative
to traditional loans. The increasing
value of specialized technological
training over general degrees. By the
(19:37):
time today's toddlers reach college age,
the definition of quote UN quote higher
education may look very different from
what we know now. The business owner who
locks all of their education funds in a
vehicle that can only be used for
traditional college expenses. might find
themselves facing a future that their
plans didn't account for. The stories
(19:58):
we've shared today, Carlos, Sarah,
Marcos, Elena, they highlight an
important truth. As business owners, we
need financial strategies that match
both our entrepreneurial realities
and the unexpected future of education.
Traditional college savings plans ask us
to make predictions about a future that's
increasingly difficult to forecast. They
(20:19):
force usto choose between having capital
available for business opportunities and
saving for our children's education. But
the Bank On Yourself approach recognizes
that for entrepreneurs, business success
and family financial security are deeply
interconnected. Let me say that again.
Your business success and your
(20:40):
family's financial security are
deeply interconnected. You
want the flexibility to strengthen your
business when opportunities arise while
still building a secure foundation for
your children's future, your
grandchildren's future, maybe even your
great-grandchildren's future, whatever
form the future may take. It's not about
rejecting 529 plans or other college
(21:02):
education vehicles entirely. They still
sometimes have their place, but it's
about creating an approach that preserves
your options and recognizes the unique
position you're in as a business owner.
And if you're not working with a
financial professional that gets that
unique position as a business owner, you
can find one. They exist. We are some of
them. The families we work with who've
(21:23):
embraced this approach share a common
idea. Often when we get these things
implemented and they're moving along,
we're doing our six-month reviews, we'll
get to the point where they're like, you
know, I feel like our
college education, you know, funding
strategy and our business growth strategy
are working together. Not competing with
each other. And isn't that how it should
(21:45):
be?Your business is one of your family's
greatest assets. Your education funding
strategy should enhance that asset, not
restrict it now.
I know some of you would love to learn
how the big kinder strategy might work
for your family and your family's
particularly education funding plan. I've
created something special for you today.
(22:05):
We're really seeing in the Wealth Wisdom
Financial Community, the Business Owners
College Funding Flexibility Guide. Say
that five times fast. The Business Owners
College Funding Flexibility Guide. It's
gonna help you evaluate your current
approach and identify potential
improvements. You don't just talk to us,
you just. Log into the Wealth Wisdom
Financial Community as a premium member.
You'll see this guide and you can use it.
(22:28):
Five critical questions every business
owner needs to answer about their
education funding, plus a
comparison tool to see how different
approaches stack up to your specific
situation. Again, just go to Wealth
Wisdom Financial Community at
wealthwisdomfp.com/community.
Join as a premium member. You can do a
(22:49):
month free trial and you'll get access to
that full library of resources as well as
a special invitation to our next group
coaching call. Planning for your
children's education shouldn't mean
sacrificing business opportunities or
locking yourself into a single vision for
the future. You can have flexibility,
control, and Peace of Mind if you have
(23:09):
the right strategy. We'd love to help you
do that today. Wealth Wisdom Financial
Community at
wealthwisdomfp.com/community.
Now, for that special announcement that I
mentioned earlier, we shared this in our
last episode. We're going to share it
again. We're hosting a freedom retreat
for business owners on August
5th through 7th of 2025. We're
(23:31):
hoping it's before maybe your kids start
their school this year. We'd love to have
you there, if you especially if you're
serious about making sure that your
family has freedom, not just you
and not just your future self, but your
family has freedom in the here and now,
and can continue on your freedom journey
to get more information. you'll want to
(23:52):
text the word freedom to
513-447-6501.
We'll get back to you during
the next business day at some point to
share more. Um What I'll share with you
now is that it's an intimate retreat
designed for setting the stage to take
that next leap on your financial freedom
journey over the next 12 months. We're
(24:14):
keeping it very intimate, very small, so
space is limited. If you are interested
at all, you'll want to text freedomTo
513-447-6501
right now we'll get back to you. We have
an application process and
are happy to share more
and talk to you about it. Then again,
(24:36):
Freedom
513-447-6501.
Thanks for joining me. Hit that subscribe
button. Give this video a like comment,
share what you. You'd like us to address
in the future and as always, live long
and profit. The stories in today's
episode are purely fictional and do not
depict any actual person or event. The
(24:57):
topics presented in this podcast are for
general information only and not for the
purposes of providing legal, accounting,
or investment advice. On such matters,
please consult a professional who knows
your specific situation.
Quote I've been saving in a 529
plan for years, but now my daughter says
she doesn't want to go to college. End
Quote. That's what Jennifer told me with
a frustration in her voice that I didn't
really get across there. Today, we're
going to tackle the college savings
dilemma that's keeping business owners up
at night, like Jennifer, and revealing a
(00:24):
flexible strategy that works whether your
kids choose to go to Harvard, trade
school, or join you in your business.
Here we go.
In a world where chaos seems to reign
supreme, where uncertainty lurks around
every corner and financial markets are
now more unpredictable than ever. There's
(00:46):
one place you can turn to to find clarity
and control. Welcome to the Wealth Wisdom
Financial Podcast. Hey, I'm Brandon.
And I'm Amanda. Join us as we dive deep
in the world of personal and business
finance to assist you in navigating
through the chaos and building the
financial future you deserve. We believe
(01:06):
when conventional financial thinking
doesn't get you where you want to go, you
need wealth wisdom. So if you're ready to
take control of your financial destiny.
Tune in to the Wealth Wisdom Financial
Podcast because in a chaotic world,
your money shouldn't be. Subscribe
now and never miss an episode.
(01:28):
Now, before we dive in, I got to give you
a heads up. We're going to be sharing
something at the end of the episode that
you're going to want to stay tuned for an
amazing opportunity to level up
your financial freedom journey. For
now, we're going to jump into this topic
of the challenge that many business
owners face. Save for college
(01:49):
or keep money invested in the business.
How do you, you know, detract from your
kids' college?How do you, all the things,
right?I want to introduce you first to
Carlos. Carlos is a successful plumbing
contractor, has three kids, 8, 11, and
14. So not exactly in college yet, but
young enough that he's starting to think
about it, right?He built his business
(02:09):
from the ground up over the past decade,
growing from a one-man operation to a
team of 15 technicians
serving three different counties in a
metropolitan area. Carlos
has always prioritized his children's
future. Like many parents, he opened
529 college savings plans for each child
shortly after they were born. Every month,
(02:33):
He faithfully contributes to these
accounts, watching the balances grow, and
feeling confident he's setting his kids
up for success. And he feels pretty
good about the tax deduction he gets for
doing that too. But recently, his
oldest, Miguel, started
showing incredible aptitude in
the family business. At 14, he's already
(02:54):
helping with simple jobs on weekends and
talking about getting his contractor's
license as soon as he's old enough to be
eligible for it. He told his dad one
night, Dad, what if I want to take
over the family business instead of going
to college?That question
stopped Carlos in his tracks. He's been
saving diligently in accounts specially
(03:16):
designed for college expenses since
Miguel was born. Miguel's 14 now. That's
many months, many contributions. If
Miguel chose a different path, those
funds would either go unused or face
penalties and taxes if withdrawn for
non-qualified expenses. At the same
time, Carlos was eyeing this
opportunity to expand his business into a
(03:38):
fourth county that would require
about $150,000 in capital to to
open up a business there. Some of that
money was, of course, sitting in his
children's 529 plans, inaccessible
without penalties, unless it was used
only for education, Carlos told me.
I realized I'd backed myself into a
corner. I was saving for a specific
(04:00):
version of my kid's future that might not
happen. I'm restricting capital that
could grow my business in the process.
Carla's situation highlights a
fundamental challenge for business owners
planning for their children's college
education. The traditional college
savings advice we hear everywhere
assumes a predictable path to a four-year
(04:21):
degree. Maybe an advanced degree, but at
least a four-year degree. It also assumes
college is going to look the same in 5,
10, 15 years as it does today. And it
assumes that locking away your money
where you can't touch it is
acceptable for qualified educational
experience. That's the best approach. But
those assumptions don't match the reality
(04:43):
of raising children and running a
business in today's rapidly changing
world. Carlos's story points to a
critical truth. Business owners
needCollege funding strategies that
are as flexible and adaptable as the
business owner is, right?You know, as a
business owner, you got to be flexible.
You got to be adaptable that your college
(05:05):
funding strategy needs to be as well. The
traditional approach to college saving
simply doesn't fit the entrepreneurial
lifestyle and or the uncertain future of
education. Let's first think about what's
happening in higher education right now.
We're not going to get political here,
but like these are things that have been
happening, you know, moving in this
(05:25):
direction for decades. Traditional
four-year degrees have been facing
unprecedented challenges since probably
before I got my college degree 20 years
ago. Skyrocketing costs that
outplace inflation, employers
increasingly valuing skills over degrees,
the rise of alternative educational paths
(05:46):
liketrade schools, coding boot camps,
digital credentials, the growing burden
of student loan debt, and you know
parents, if we want our kids to have that
same debt that we ended up with at the
end of it. Add those
concerns to the unique situation of
business owner families, where children
might want to join the family business,
(06:06):
start their own venture, or pursue
specialized training that doesn't fit
their traditional college model. Let's
get positive here, let me tell you about
Sarah. Sarah runs an
agency, and for years, she diligently
funded 529 plans for her twin daughters.
When they turned 16, she'd
accumulated $180,000 in
(06:28):
her 529 accounts for her twins.
Wow, holy cow, amazing for them.
Then an unexpected opportunity arose.
A competitor was selling their client
list and proprietary market research
database. at a significant discount due
to the owner's health issues. That owner
was much older, they're having some
(06:48):
health issues, they wanted to sell the
assets of the business, and the asking
price was $200,000, a bargain
considering the potential return. Sarah
found herself with a difficult choice.
She had enough money in her business
reservoir to cover half of the cost.
So of the 200,000, she had about 100,000,
(07:08):
you know, in her six-month emergency
fund, like she was taught to do. Where
was the other 100,000 going to come from?
Well, you know money on her balance sheet
was what's sitting in her daughter's 529
plans. And that money would face lots of
taxes and penalties if it was used for
anything other than qualified education
expenses. So Sarah passed on the
opportunity, choosing to preserve her
(07:29):
daughter's college funds. Then six months
later, the girls were about 16 and 1/2,
about to turn 17, they announced they had
different plans. One wanted to
attend a trade school for medical coding,
which would cost far less than
traditional college. The other one to
travel and build her photography
portfolio. Sarah was now looking at
(07:50):
significant money trapped in 529
plans that would either go unused or be
withdrawn with penalties.
Meanwhile, the competitor who had
approached her and sold the assets of the
business, sold it to another agency that
now presents serious competition in her
market. Sarah was trying to do the right
thing. but she ended up restricting her
(08:10):
business growth while saving for a future
her daughters didn't even want. This
is where the Bank On Yourself strategy
offers a compelling alternative. Before I
explain what it is, let me tell you about
Marcus and his family. Marcus runs a
growing landscaping business and has two
kids. Rather than putting all his
education savings into a 529, he
(08:32):
structured a Bank On Yourself type policy
that built cash value his family could
access for any purpose,Not just
education. When his son decided to attend
a traditional university, Marcus was able
to take a tax-free policy loan to help
cover the costs. And when his daughter
decided she wanted to buy a lawn care
franchise instead of attending college,
(08:54):
he was able to help her with that too,
using the same funds without penalties or
restrictions. The most powerful part?
Before any of this, Marcus had already
used the policy's cash value as a
financing tool for his business, taking
out loans against it to purchase
equipment during peak seasons, repaying
those loans during his high cashflow
(09:14):
months. This education
funding strategy actually strengthened
his business while his kids were growing
until they were ready for their adulting
time, rather than competing with it. This
is a paradigm shift that successful
business owners are making, moving from
rigid, single-purpose education
accounts to financial strategies that
(09:34):
support both the children's futures and
their business growth, whatever form they
may take. And I'm not preaching here.
I'm actually sharing what we really do.
Full disclosure, our son does not have a
529 plan or any other kind of
government-sponsored college savings
fund. We're preparing in other ways, and
we love to call the funds that we're
(09:56):
setting aside for his future his adulting
fund, rather than just a college fund.
We also firmly believe that teaching him
about how money works is more valuable
than giving him money. So far, he doesn't
get an allowance, but he does get a
weekly investing club time slot on my
calendar. that will pay dividends for the
(10:17):
rest of his life and maybe into future
generations, right?His children and
grandchildren, as he follows our model
and invests in their education with
teaching them how money really works and
how to use it in their favor. What better
gift to give your kids, right?Now, stay
tuned after the break where we'll talk
about some common objections, some recent
law changes that might have you thinking
twice about whole life insurance versus
(10:39):
529s.
Ready to take the next step towards
securing your financial future?Whether
you're planning for retirement, saving
for your dream home, or you just want to
make your money work harder for you, the
team at Wealth Wisdom Financial are ready
(11:00):
to assist you. And now it's easier than
ever to see how we might give you a boost
on your financial journey. Schedule a 15
minute discovery call with one of us
today. And let's discuss your questions
and your financial goals together. Don't
wait any longer. Your financial freedom
awaits. Schedule your discovery call at
www.wealthwisdomfp.com/call.
(11:29):
I mentioned the first story, the
tax advantages of the 520 nines. And if
you do move, you know there's there's
different tax advantages for bank and
yourself type whole life policies, but
you don't get a tax deduction in the
current year, at least under current law.
And it's a valid point, right?529s
offer a tax-free, you get a tax deduction
(11:51):
now, tax-free growth, as long as you
follow all the rules and everything, and
as long as you use it for qualified
educational expenses. But this benefit
can actually become a significant
restriction. that can be particularly
problematic for business owners. First,
there's the issue of flexibility. If your
child chooses not to attend college or
needs less than you saved, you face
(12:11):
taxes, 10% penalty on earnings for
non-qualified withdrawals. You can change
beneficiaries to another family member,
but that doesn't help if you need those
funds for your business. Second, there's
the opportunity cost. Money locked up in
a 529 can't be used to fund business
growth,Manage cash flow, seize
opportunities, those kind of things for
business owners, the return on capital
(12:33):
invested in their business. often far
exceeds what they might earn in the 529
plan. So just think, the taxes that you
saved, the taxes that you're saving as it
grows, um if you added those up, could
you actually make more money in your
business if that money was working there?
Then there's the dun, dun, dun, the
FAFSA impact. The FAFSA is the Free
(12:55):
Application for Federal Student Aid. Many
business owners don't realize that 529
plans owned by parents count as
assets on the FAFSA. potentially reducing
eligibility for financial aid. In
contrast, cash value life insurance is
not counted as an asset on the FAFSA
under current rules. Now,
(13:16):
we get to talk about something that I'm
I'm sure those of you who keep up to date
on the latest law changes have been
thinking this whole time and waiting for
me to address. There's been some exciting
news for families worried about having
money stuck in 529 plans.
Thanks to SECURE 2.0 Act that took
effect in 2024, there's now another
option for taking unused 529
(13:37):
funds. Beneficiaries can roll over
up to 35,000 from their
529 plan into a Roth IRA in their
name without any kind of taxes or
penalties. Let me give you an example.
Diego. Diego's parents saved in a
529 plan starting when he was born.
After graduating with minimal student
(13:58):
debt thanks to scholarships, Diego had
still had about 50,000 left in his 529
plan. Since the account had been opened
for at least 15 years, Diego was
able to start rolling funds into the Roth
IRA up to 7000 per
year based on current contribution
limits. And as long as he had earned
income matching those amounts, it's not
(14:21):
like he could just take 50,000 and roll
it over. He had to do 7000 per year as
long as he was actively working and was
making at least 7000. Now sure,
this gave him a a good head start on
retirement savings while avoiding taxes
and penalties that would have come from
non-qualified withdrawals. But remember,
there's important requirements. The 529
(14:41):
had to be open for at least 15 years.
Contributions made within the five last
five years are not eligible to be moved,
so you have to be very careful which
money it was moving and when. And there's
a limit of $35,000. That's a
lifetime limit. So the 50,000 Diego
had, he could only move 35,000 of it,
leaving 15,000 in the 529 still to figure
(15:02):
out what to do with. That can be a safety
net for families concerned about over
funding 529 plans, right?If you got a
whole bunch of money there, hopefully
gives you a little bit of peace. The
other part of this is it let's say Diego
makes lots of money. He's not limited
by normal income limits and can still do
that rollover. So if your child becomes a
high earner who would normally be phased
(15:23):
out of Roth eligibility, they can still
benefit from this rollover from 529 to
Roth IRA feature. But here's the
big gotcha. While Diego will not be
able to roll over the entire amount that
you know he has 50,000, but the lifetime
limit's thirty-five. He'll also have to
worry about the restrictions of the Roth
IRA account. He'll have 35,000 that
hopefully is growing, but all of that
(15:45):
money gets locked up until he's 59 1/2
years old. Even if he wants to, you know,
if anytime he wants to use it, he can't
without taxes or penalties. Now, Can you
imagine all the things Diego could use
from age 22 to age 60 with
that 30,000?If he was able to borrow
against it, refill it without
interrupting his compounding, which gift
(16:06):
would you like to give your children?We'd
be remiss not to mention one more thing.
Be sure to check with your tax pro about
how a 529 to Roth IRA rollover is
treated in regard to state taxation.
This is such a new option, right?It just
became a thing in 2024
that a lot of states haven't given
clarity here and needed to check what are
(16:27):
the rules in your state. Okay,
almost done here. Just one more story
that helps highlight these issues.
For here, for this one we're going to
talk about Elena. Elena owns a successful
bakery with two locations. When her
daughters were born, Elena's financial
advisor recommended maxing out a 529
plan, which she did for several years.
(16:49):
But when an opportunity came to open a
third location in a prime spot, Elena
found herself cash strapped, despite
having significant savings in her
daughter's 529 plans. She learnedBut
think on yourself and decided to redirect
her saving education saving strategy over
the next seven years, she built up
substantial cash value and a properly
designed policy. And then, when her
(17:11):
daughter got accepted to her dream school
Elena was able to take tax free policy
loans to help her cover the cost. But
here's where the story gets interesting
during her daughter's sophomore year. The
COVID-19 pandemic hit, forcing her bakery
to temporarily close its dining areas.
While many competitors struggled to stay
afloat, Elena was able to access her
(17:32):
policies cash value to pivot her business
model to delivery and takeout,
install some new safety equipment, and
even retain all of her staff. Elena
told me that money saved both my business
and my daughter's education. If it had
all been in the 529 plan, I might have
had to choose between keeping my business
(17:53):
afloat and keeping her in school. The
Bank on Yourself strategy provided Elena
with something 529 plans simply can't
offer options. We all love options,
and as business owners navigating
uncertain times while trying to secure
our children's financial futures, options
are invaluable. They're kind of
(18:13):
like that American Express commercial,
right?Like 529 plan this much. Bank on
yourself strategy this much. Options,
priceless, right?Now it's worth noting
that banking yourself isn't an all or
nothing proposition. Many of the business
owners we work with use a combination of
these strategies. keeping perhaps keeping
some money in 529 plans, maybe what the
grandparents give, you know, those kind
(18:34):
of things, while directing a bulk of
their college education savings
toward more flexible vehicles like a
properly structured Bank On Yourself type
policy. For example, one thing
that some parents use the 529 for still
is for K through 12 private education
that helps with tax deductions for
current year or next year's tuition and
(18:55):
compliments really well what they're
doing with Bank On Yourself. The keyis
finding the right strategy for your
specific situation, one that acknowledges
the unpredictable nature of both business
and education in the coming decades.
Let's talk about that future for a
minute. The landscape of higher education
is changing rapidly. We talked a little
(19:15):
bit about this before, but just consider
these trends. The rise of online degrees
and credentials from prestigious
universities. Employers like Google,
Apple, IBM creating their own
certification programs. The growth of
income share agreements as an alternative
to traditional loans. The increasing
value of specialized technological
training over general degrees. By the
(19:37):
time today's toddlers reach college age,
the definition of quote UN quote higher
education may look very different from
what we know now. The business owner who
locks all of their education funds in a
vehicle that can only be used for
traditional college expenses. might find
themselves facing a future that their
plans didn't account for. The stories
(19:58):
we've shared today, Carlos, Sarah,
Marcos, Elena, they highlight an
important truth. As business owners, we
need financial strategies that match
both our entrepreneurial realities
and the unexpected future of education.
Traditional college savings plans ask us
to make predictions about a future that's
increasingly difficult to forecast. They
(20:19):
force usto choose between having capital
available for business opportunities and
saving for our children's education. But
the Bank On Yourself approach recognizes
that for entrepreneurs, business success
and family financial security are deeply
interconnected. Let me say that again.
Your business success and your
(20:40):
family's financial security are
deeply interconnected. You
want the flexibility to strengthen your
business when opportunities arise while
still building a secure foundation for
your children's future, your
grandchildren's future, maybe even your
great-grandchildren's future, whatever
form the future may take. It's not about
rejecting 529 plans or other college
(21:02):
education vehicles entirely. They still
sometimes have their place, but it's
about creating an approach that preserves
your options and recognizes the unique
position you're in as a business owner.
And if you're not working with a
financial professional that gets that
unique position as a business owner, you
can find one. They exist. We are some of
them. The families we work with who've
(21:23):
embraced this approach share a common
idea. Often when we get these things
implemented and they're moving along,
we're doing our six-month reviews, we'll
get to the point where they're like, you
know, I feel like our
college education, you know, funding
strategy and our business growth strategy
are working together. Not competing with
each other. And isn't that how it should
(21:45):
be?Your business is one of your family's
greatest assets. Your education funding
strategy should enhance that asset, not
restrict it now.
I know some of you would love to learn
how the big kinder strategy might work
for your family and your family's
particularly education funding plan. I've
created something special for you today.
(22:05):
We're really seeing in the Wealth Wisdom
Financial Community, the Business Owners
College Funding Flexibility Guide. Say
that five times fast. The Business Owners
College Funding Flexibility Guide. It's
gonna help you evaluate your current
approach and identify potential
improvements. You don't just talk to us,
you just. Log into the Wealth Wisdom
Financial Community as a premium member.
You'll see this guide and you can use it.
(22:28):
Five critical questions every business
owner needs to answer about their
education funding, plus a
comparison tool to see how different
approaches stack up to your specific
situation. Again, just go to Wealth
Wisdom Financial Community at
wealthwisdomfp.com/community.
Join as a premium member. You can do a
(22:49):
month free trial and you'll get access to
that full library of resources as well as
a special invitation to our next group
coaching call. Planning for your
children's education shouldn't mean
sacrificing business opportunities or
locking yourself into a single vision for
the future. You can have flexibility,
control, and Peace of Mind if you have
(23:09):
the right strategy. We'd love to help you
do that today. Wealth Wisdom Financial
Community at
wealthwisdomfp.com/community.
Now, for that special announcement that I
mentioned earlier, we shared this in our
last episode. We're going to share it
again. We're hosting a freedom retreat
for business owners on August
5th through 7th of 2025. We're
(23:31):
hoping it's before maybe your kids start
their school this year. We'd love to have
you there, if you especially if you're
serious about making sure that your
family has freedom, not just you
and not just your future self, but your
family has freedom in the here and now,
and can continue on your freedom journey
to get more information. you'll want to
(23:52):
text the word freedom to
513-447-6501.
We'll get back to you during
the next business day at some point to
share more. Um What I'll share with you
now is that it's an intimate retreat
designed for setting the stage to take
that next leap on your financial freedom
journey over the next 12 months. We're
(24:14):
keeping it very intimate, very small, so
space is limited. If you are interested
at all, you'll want to text freedomTo
513-447-6501
right now we'll get back to you. We have
an application process and
are happy to share more
and talk to you about it. Then again,
(24:36):
Freedom
513-447-6501.
Thanks for joining me. Hit that subscribe
button. Give this video a like comment,
share what you. You'd like us to address
in the future and as always, live long
and profit. The stories in today's
episode are purely fictional and do not
depict any actual person or event. The
(24:57):
topics presented in this podcast are for
general information only and not for the
purposes of providing legal, accounting,
or investment advice. On such matters,
please consult a professional who knows
your specific situation.
Popular Podcasts
Stuff You Should Know
If you've ever wanted to know about champagne, satanism, the Stonewall Uprising, chaos theory, LSD, El Nino, true crime and Rosa Parks, then look no further. Josh and Chuck have you covered.
Dateline NBC
Current and classic episodes, featuring compelling true-crime mysteries, powerful documentaries and in-depth investigations. Follow now to get the latest episodes of Dateline NBC completely free, or subscribe to Dateline Premium for ad-free listening and exclusive bonus content: DatelinePremium.com
Las Culturistas with Matt Rogers and Bowen Yang
Ding dong! Join your culture consultants, Matt Rogers and Bowen Yang, on an unforgettable journey into the beating heart of CULTURE. Alongside sizzling special guests, they GET INTO the hottest pop-culture moments of the day and the formative cultural experiences that turned them into Culturistas. Produced by the Big Money Players Network and iHeartRadio.