dullard
Elite Member
- May 21, 2001
- 26,042
- 4,689
- 126
Tax free gains are beneficial no matter what state you are in.Some of the biggest states forbid deductions on 529 plans. So it depends on the state.
I would say in many cases a Roth IRA is a better way...
What state are you in, in some states a 529 is a good idea, in others the state gives no benefits for a 529, so it is pointless to use.
The child can't withdraw from a Roth IRA until she is 59.5. That is a nice-to-have, but really she'll have that money when she probably already has a career and money. It just isn't that helpful to the child.
The 529 lets the child withdraw it right at the point in life where the child has her biggest expenses (pays for college and she'll be far less in debt when she wants a car or a house).
Both the 529 and Roth IRA let you invest in just about anything. Both are after-tax contributions for federal tax purposes. Both get tax free gains. Both have withdrawal restrictions and penalties if the child doesn't meet them. So, they are very similar to each other. The real key difference is the Roth IRA has a terrible withdrawal age for a child and the 529 has a possible state tax deduction.
Last edited: