Florida PrePaid Plan: PrePaid vs. a 529 Investment Savings Plan

Tags: Florida PrePaid Plans, Florida 529 Savings Plans

Some of the highlights of 529 Plans include:

  • Ability to use the money for colleges across the nation
  • Funding may be allocated for room and board (with a few potential stipulations)
  • Unlike the Florida PrePaid Plan where the money must be spent within ten years of the student’s projected enrollment, there is no set time period with the 529
  • There are no minimums to open the plan and contribution amounts and frequency can vary

One of the most common misconceptions about the Florida 529 is that it is just a savings plan. In effect it is, but one still subject to the inconsistencies of global economics. Therefore, a discussion about your risk-tolerance and which investment options align with that risk-tolerance must be had before any contribution is made. In other words, while there is the potential to gain, there is also the possibility of losing money.

This does not impact the viability of a 529. It simply justifies a close evaluation.

Florida PrePaid Plans vs. Florida 529 Savings Plans

There are several distinctions between these two options, with add-ons like a University Dormitory Plan, (typically based on a first-come, first-serve basis), with the prepaid alternative.

From our perspective, the substantive difference lies in the financial risk:

  • Florida PrePaid Plans offer a guarantee of covering future tuition by the State of Florida.
  • A 529 Plan allows for you to put a greater amount to work for college savings.
  • You can change a 529 Plan beneficiary more easily than a Florida PrePaid Plan.

We recommend participating in the Florida PrePaid Plan first. It offers protection of your contribution which is essential for most people when it comes to this type of financial investment.

Then, if you have more available cash for college savings, placing that balance into a 529 Plan is an option to consider. If you know your child will likely not attend a Florida university, we do recommend a 529 Plan in addition to the Florida PrePaid Plan. 

If you would like help choosing and investing in a 529 or College PrePaid Plan, please contact me at derek.pilecki@gatorcapital.com or (813) 282-7870. While we believe a college education is important, we also understand it is expensive, and the process is daunting.

We do not charge fees for helping with 529 Plan accounts. We get two benefits from helping you: 1) as parents ourselves, we feel good about setting you and your child on the correct path to pay for college and 2) it enables us the opportunity to begin a discussion about your other investment needs. 

If you have a question beyond the scope of this article, feel free to visit our “Ask Us a Question” page or leave a comment below so we may assist you with your specific situation.

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