Edelman says that Americans should be encouraged to take a more holistic approach to education planning and saving, particularly as demands on the workforce shift.
“Those who are using 529 plans are probably saving too much with too narrow a focus,” says Edelman. “They’re fixated on their child’s bachelor’s degree, when what they should be focusing on is not so much the importance of a college degree, which becomes less and less important over time, but instead focus on lifelong learning.”
The 529 account is versatile, in that it can be transferred between family members if the cost of the original beneficiary’s education does not exhaust its assets.
Baby boomers and Generation Xers could still use the 529 assets intended for their children, then, if they wanted to pursue a new profession or an encore career.
“It’s not only for the kids of clients, but for the clients themselves,” says Andersen. “If childless adults plan on going back to school, they can certainly establish the accounts themselves as long as they’re used for post-secondary education.”
In some ways, Edelman believes that 529s are insufficient to meet the educational needs of Americans going forward—since they’re restricted to accredited post-secondary institutions, they don’t cover many vehicles for continuous and lifelong learning like online courses, experiential education and training.
Because of the rapid advance of technology and the cultural and lifestyle changes that are occurring around it, Edelman says that educational savings need to be more than just a 529 account. Thus, millennials are right, in part, that some education savings should be in taxable accounts. Edelman uses taxable vehicles deemed “L-3” accounts to help households save for education that may not be covered by a 529.
“Half of what a freshman learns in their science classes is obsolete by their junior year,” says Edelman. “A 529 is limited to college expenses, but we know lifelong learning happens outside the formal setting. The question, then, is whether you should be saving exclusively within a 529.”
The best cure for millennials’ love for cash savings accounts is more education, says Edelman, who advocates for financial education to be offered at every level within schools.
Education saving should be looked at as a multi-generational, long-term investment, said Edelman, requiring more aggressive solutions than what’s available in many 529 plans. Moving forward, household education planning needs a completely new kind of financial plan, says Edelman.