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Gerber Grow-Up Plan - Stupid Investment of the Week?

By March 13, 2011

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The emails keep coming in... I just got one with a link to this older article from MarketWatch.com, referring to the Gerber Grow-Up Plan as the "stupid investment of the week."

So, I raise the question yet again for my readers, hoping some of you can share your personal experiences.

Does life insurance as a college investment option make sense for parents of young children?

My answer has consistently been "no," but I get many emails from people (mostly insurance agents) telling me that I'm wrong.

Let's hear what you think.

March 14, 2011 at 4:59 pm
(1) James Garfinkel says:

Juvenile life insurance as a college savings tool is different from the child insurance products offered by Gerber Life. The Gerber Life College plan is adult insurance.

Although the administration, sales, and insurance costs associated with life insurance are greater than the drag of a 529 plan, a well-structured juvenile life insurance product will maximize cash value growth, and minimize sales commission and insurance costs.

Juvenile life insurance provides growth guarantees, unavailable with a 529 plan. Indexed juvenile life, a popular form of juvenile life insurance, is permanent universal life insurance that has cash value increases linked to the performance of an equity index (e.g., S&P 500) up to a certain percentage (a “cap”) with downside protection (a “floor”). Indexed Juvenile Life has a growth floor of 0%-2% and a growth cap of 13%-15% reducing volatility.

Indexed juvenile life (inclusive of costs) has actually outperformed the SPDR S&P 500 ETF over the past 10 to 15 years because of its unique cap and floor structure. See http://newamsterdamlife.com/indexed_juvenile_life.php
The tax advantages of juvenile life insurance are similar to adult permanent insurance products (i.e., tax deferred growth and tax advantaged withdrawals).

Unlike a 529 plan, the cash value of juvenile life insurance is not limited to qualified educational expenses, and can be used at any time, for any purpose, without penalty. The cash value of juvenile life insurance is also sheltered from the federal financial aid needs analysis process. If a child is lucky enough to obtain a scholarship or defers college, the funds continue to grow, providing a lifetime of fully-paid insurance.

The combination of competitive performance, flexibility, and a lifetime of benefits after college, make juvenile life insurance worth a look for parents and grandparents seeking alternatives to traditional college savings.

June 30, 2011 at 12:17 pm
(2) AJ says:

Ken, do you have any comments on what James Garfunkel is saying. He seems to have some very good points. I would be interested in hearing your rebuttal if you will against these types of policies. And please also touch on the “rider” policies in comparison to what Mr. Garfunkel says as well.

I look forward to your feedback.


July 20, 2011 at 12:34 pm
(3) Ptrop says:

Mr. Ken Clark
Do you have any good recommendations?. We don’t want to get stuck with a plan that only can be use in some specific colleges or in case or kids decide to go out country for education we lost our investment. What will do you think?

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