re: Savings Plan for Children - 529 vs. Other Options

They are making some improvements to the 529 plan in regards to funds that aren't used for educational purposes. I think starting this year you can roll over 35K from the 529 to a Roth without penalty if it wasn't needed for education.

I personally just like the 529 because it's easy for the grandparents. They can throw money in when they want. Plus they like knowing it's going towards education.

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FWIW I hate 529s. I can’t think of a more commonly wasted vehicle.

More often than not, saving it in an account for yourself and just giving it to your child when you’re ready is the most flexible and reasonable thing to do.

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Maybe you dont fully understand the 529?

You can save a lot of money putting that money aside in a 529 for education purposes and even if said kid doesnt go to college (or you pay private school tuition out of it) you can just roll the money into a IRA over time without penalty. It's really a no brainer to me especially with the IRA rule now.

In GA I can deduct up to $8000 a year on contributions to the 529 on my state tax owed (which is at 5.75%). We contribute $200/mo right now so $2400 * .0575 = $138/yr in State tax savings. Once our kid is in college, anything we take out to pay for that is tax free, including all that growth over the years. If we continued to do $200 for 18 years (it will go up over time) we would have over $100k after 18 years and the majority of that is growth at 9% annual RoR. That's a f*ck ton of tax savings as opposed to just throwing that in a brokerage account over the same time.

Even if our daughter doesnt go to college, i can just roll that money into a ROTH IRA for her every year for a while. Seems like every other year now they are giving more and more reasons why a 529 makes a ton of sense.