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

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This will go way up over time

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Maybe. It’s not indexed to inflation in the legislation though, so I wouldn’t bank on it.

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And its definitely not "minimal" tax savings when you're talking about huge growth money being taken out tax free to pay for educational expenses. Using my example, over $60k of the over $100k is growth. I can take that $60k growth out completely tax free to pay for school. If that money was sitting in a brokerage account even if it was ALL long term capital gains $60k taxed at 15% is $9k in federal tax. Thats a gigantic amount of tax savings. This doesnt even include the state tax I'm saving every year which after 18 years amounts to another $2,500 as well. Thats well in excess of 11 grand of tax money I dont have to pay with it in the 529 instead of just letting it ride in a taxable brokerage account. And in the end if she doesnt go to college we just roll this money into a ROTH IRA year after year for her once shes 18/19 and she'll retire with a nice nestegg as a result just from that

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If she doesn’t go to college and that cap doesn’t go up you’re also looking at 10% penalty and ordinary income taxes on up to $60k - if you’re paying 15% LTCGs you’re paying at least 32% in taxes and penalties on that money. Poof, there goes the tax savings by a factor of 1.5x.

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There's also a scholarship clause for 529s where the penalty is waved for cashing it out if the school is paid for via scholarship.

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But income taxes still apply. 22%+ there too using your CG bracket.

To each their own, but it’s not the no brainer you may think it is for many people, at least not under current tax laws. If you’re saving enough in a 529 to completely pay for college, you’re either going to save a lot in taxes or get slapped with taxes and penalties. I don’t love the odds. If you’re keeping it under/around the $35k current rollover limit, I can get on board with that a little easier.

Additionally, part of my issue is the 15 year requirement for the Roth means your kid is basically at least 15 years from a college or no college decision, and who knows what college will even look like at that time.

More often than not, I’d rather see someone maxing 401k and Roth accounts, at a minimum, before I even get into 529 plans.