Are 529 Plans Still a Good Idea?

Why fewer high school grads – with their parents’ blessing – are going to college today

Ric Edelman: It's Wednesday, October 18th. Are you losing faith in the value of going to college? I'll take some of the credit for that. I've been blasting the cost of college for years. You ought to watch my Masterclass on How to Prevent College from Ruining your Life. It's free. The link is in the show notes.

As recently as ten years ago, most Americans felt good about college. Back then, 86% of college graduates said that college was a good investment. 97% of parents said they expected their kids to go to college. And in 2007, 70% of high school students did, in fact, go to college.

But none of that is true anymore. Today, in new surveys, only 41% say a college degree is very important. 45% of Gen Z say that a high school diploma is all you need to ensure that you'll have future financial security. Almost half of American parents say they'd prefer their children not to enroll in a four year college. And so now only 62% of high school grads go to college.

The big reason that everybody cites for this shift cost and the United States, the average cost of college at a public university is $26,000 a year, $55 grand at a private college. But compare that to other countries. In Canada and Japan, the cost is just $5,000 a year. In Italy, Spain and Israel, it's about $2,000. In France, Denmark and Germany, it's virtually free.

Now, having a degree is supposed to mean that you get a higher paying job with higher lifetime income, justifying the cost of the degree that's no longer true, especially when you consider the cost of student loans.

The Federal Reserve Bank of St. Louis looked at the wealth of US households, not their income, but their wealth. And they discovered that the benefits of college evaporate. Yeah, college grads have more income, but they don't accumulate more wealth. That's because they're higher incomes go to paying off loans that people who don't go to college don't have to pay, and going to college prevents you from entering the workforce for six years. That's six years of not earning an income, of not contributing to a 401(k), which creates wealth. And over 40 years, the lost compounding on that money is incredibly expensive. You're better off getting a lower paying job at 18 than a higher paying job at 24.

And all of this assumes that you actually graduate. But tens of millions of college students never do. A third of freshmen drop out, only half graduate after six years, which means all these people are not getting the benefits of the degree, but they're still saddled with the loans anyway. Plus, the lost years of not earning an income while they were in college. 

So yeah, Americans are souring on college, and rightly so. So are you still trying to help your clients with college planning? Are you still telling them to save in a 529 plan? It's time for you to start telling them to consider having their kids not go to college. A great way to conversation is having your clients and their kids watch my Masterclass again. The link is in the show notes, and then you'll really have something worthwhile to talk about.

And if your advisor is flatly assuming that your kids are going to go to college, if you're making that flat assumption, you need to ask your advisor to show you calculations proving that college is really worth it, especially based on your child's likely choice of school and major college might have been a given when you were in high school, but it's not a given now. Make sure your advisor is giving you advice for today's world.

And, you know, just as education is changing, so is the health and wellness industry. New technology and innovation are driving the future. And this trend is going to continue, leading to new markets for health related products and services. I want to share with you the key themes and trends in health, wellness and fitness.

First, we've got digital health and wearable technology. Telemedicine, for example, routine checkups, handling of minor illnesses and injuries. Managing chronic disease and medication compliance, delivering mental health counseling, dermatology evaluations, refilling prescriptions, health education. All this can be delivered via zoom and phone. Makes it easier for you and the doctor. Cheaper too. That means you're more likely to get the help you need.

We also have personalized nutrition. We can customize your dietary plan based on your genetic data, your lifestyle factors, and your individual health needs.

Third, we've got mental health awareness. We realize more than ever the importance of focusing on mental health. We're getting rid of the stigma associated with mental health issues.

Fourth is holistic wellness. We realize there's an interconnectedness of physical, mental, and emotional well-being. My wife, Jean talks about this every week in her podcast. The link to that is in the show notes today.

And fifth, we've got health and wellness tourism. People travel all over the world to get the treatment they need. The best care and services are not always available here in the US anymore.

Number six, we have plant-based diets. They're not only good for you, they're good for the environment. And it avoids animal cruelty.

Seventh - fitness technology and gamification. Go play with Oculus [now Meta Quest 2]. You'll get a workout while you're playing video games.

Or number eight, use a remote fitness coach. Virtual trainers were made popular by Peloton during the pandemic. Now there are dozens of competing companies doing something similar.

Number nine is preventive health care. We're going from a sick care industry to a real health care industry, which emphasizes prevention and early detection.

Related to that is number 10, sustainability and eco-friendly practices. So we're helping the environment while we're helping our health.

And we're using number 11, AI and data analytics, to do all of this to improve health outcomes.

And number 12, inclusion and diversity. You know, most research studies of the past 100 years all focused on white males. We now realize that minorities and women have biologically different responses to drugs and other treatments, as well as susceptibility to different diseases.

So we're finally focusing on them in product research and development. And the best part is that we're seeing number 13, noninvasive health treatments, a nasal spray instead of a needle looking at the body via a scan instead of a biopsy. It's making everything safer, easier and cheaper to cure the patient.

All this is helping us live longer and healthier. That's number 14, senior fitness - tailored health and fitness programs that meet the needs of an aging population.

All told, the global health and wellness market was nearly $5 trillion last year. It's expected to hit $7.5 trillion by the end of the decade. And one way you can tap into the health and wellness boom is to invest in the Global X Health and Wellness ETF. The symbol is BFIT. The BFIT ETF tracks the Indexx Global Health and Wellness Thematic Index. You can learn more about it at Global X ETFs.com. Or if you're not a financial advisor, ask your financial advisor about it the Global X Health and Wellness ETF, symbol BFIT.

What are you doing on October 24th? Come for my new webinar. Bonds are back. That's thanks to the highest interest rates in 20 years. But are you helping your clients make the most of today's opportunities from today's bond yields? Join me October 24^th, it's a Tuesday, 1 p.m. Eastern, for a special webinar that will show you how to capture yields in today's high rate environment with bond ETFs. I'll be joined by David Brown, the managing director at PIMCO, and we'll tell you the best fixed income opportunities that are available to your clients right now. You'll also get crucial insights into the economic outlook that you can use in your client conversations, and you'll get one CE credit to boot. You can register for the webinar about today's bond yields for free. The webinar is Tuesday, October 24th, 1:00 pm Eastern.

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