April 7, 2013

Is Gerber Life College Savings any Good?

I recently saw a TV ad for Gerber Life College Savings.   The commercial was very similar to the Gerber Life Insurance ads that I've seen in the past.  However these new ads were for a college savings plan instead of life insurance.... or at least thats what the TV ads pitched.   In actuality they're just selling a cash value life insurance plan and pitching it for college savings.

I set out to find more information on the plan.  The Gerber site has little detail.  But others have examined it.  


Market Watch doesn't like it.   They wrote This college savings plan flunks the test
In fact they really don't like it, they said : "I will use words like “awful” and “lousy” and “Stupid Investment of the Week.”

But what about people who don't hate cash value insurance?   The Insurance Pro Blog wrote their Gerber College Plan Review on the plan.     The point out a major problem with the plan is that it apparently fails an IRS test and the investment returns lose preferential tax deferral treatment.   Yet they do favor cash value for college savings.  They conclude with "The Gerber College Plan falls well short of what we can accomplish with high quality cash value life insurance products."

The Gerber Life website says : "For example, putting aside $35.42 monthly for 18 years will get you $10,000"   If thats a real example of a real policy then that turns out to be around a 3.1% return and its taxable.    Given today's low rates that isn't awful but its not very good either.   

The Gerber plan also has no special tax benefits that 529 plans do.  Most states offer some form of tax benefit for 529 plans.

Bottom Line :  Avoid it.  Overall the Gerber Life College Savings plan seems to be a pretty poor choice.
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