OK anandtech investment gurus and fellow parents some advice would be appreciated here.
I have a 4 month old daughter and a recent bonus from work of almost $2,000 (after taxes) that I would like to use to start a college savings account for my daughter.
The two options I am considering are:
529 Plan <Link>:
Advantages:
Tax free growth if used for qualified educational expenses.
Up to $2000/yr deduction from state taxable income (not federal).
Can be trransferred to other children or myself.
Can be withdrawn without the 10% penalty (federal income tax would still be owed on the gain).
Disadvantages:
Ultimately the growth isn't tax free if not used for college expenses.
The federal tax advantage expires 12/31/2010 and congress must re-up this provision.
Investment options limited to the companies that runs my state's plan (Putnum and Vanguard).
Roth IRA:
Advantages
Tax free growth if used for qualified education expenses or after five years for any withdraw. No penalty either for qualified expenses or after age 59.5.
Non-growth money can be withdrawn without taxes or penalty for any reason.
Unlimited Investment Options/Companies
Disadvantages:
No state tax benefit
No other???
I'm thinking I'm leaning toward the Roth. But was looking for some other opinions.
FYI: I use my 401k through work for my personal retirement account.
I have a 4 month old daughter and a recent bonus from work of almost $2,000 (after taxes) that I would like to use to start a college savings account for my daughter.
The two options I am considering are:
529 Plan <Link>:
Advantages:
Tax free growth if used for qualified educational expenses.
Up to $2000/yr deduction from state taxable income (not federal).
Can be trransferred to other children or myself.
Can be withdrawn without the 10% penalty (federal income tax would still be owed on the gain).
Disadvantages:
Ultimately the growth isn't tax free if not used for college expenses.
The federal tax advantage expires 12/31/2010 and congress must re-up this provision.
Investment options limited to the companies that runs my state's plan (Putnum and Vanguard).
Roth IRA:
Advantages
Tax free growth if used for qualified education expenses or after five years for any withdraw. No penalty either for qualified expenses or after age 59.5.
Non-growth money can be withdrawn without taxes or penalty for any reason.
Unlimited Investment Options/Companies
Disadvantages:
No state tax benefit
No other???
I'm thinking I'm leaning toward the Roth. But was looking for some other opinions.
FYI: I use my 401k through work for my personal retirement account.
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