College Fund 529 plan?

[Charlie]

I have one for each of my kids. My oldest daughter graduated high school last year, and I just began withdrawing funds for her college expenses. It's one of the best decisions I made years ago when the kids were babies. I have used American Funds, and have had a good experience with them.

[bbqfan5909]

Another good way to pay for college for sure, thanks for sharing that info.

Withdrawals are treated as a “return of contribution” first and as earnings second. This means that a person who has been contributing $5,000 per year for the past five years can withdraw $25,000 tax-free, provided the proceeds are used for qualified educational expenses. (Any withdrawals that exceed the total of one’s contributions and are attributable to earnings will be taxable for those under age 59½.)

[PlanoDano]

pros: tax free growth as long as spent on qualifying expenses
cons: forces you into the market

alternative: BRRR real estate
Buy repair rent and repeat
Better growth, better tax advantage

[CSanders]

How do you get money out for college?

I have an option to move money I have contributed directly back to my checking account. I'm not sure if this is the best way to pull money to pay for college or not. I will cross that bridge in 18 years lol.

[No-Tox]

Also, 529 can be paid for any private schooling so that means it can be used prior to college.

[12RingKing]

529 plans don’t have a lot of flexibility. Roth IRAs have more flexibility for YOU as the contributor. You can use it for your kids college or for your retirement in the event that your kids don’t need that money. The contributions you make to a Roth IRA can always be withdrawn because it’s all after-tax money and the growth is tax free when you withdraw at 59.5.

The benefit of the 529 plan is there are not any limits to contributions. Roth accounts can only have 6,000 contributed to them if you’re under 50. 50 or older can add $1000 to their max contributions to Roth.

That’s the way I see it and some of the reasons I went with Roth IRAs for myself and my wife that we max out each year. If our kids are smart or athletic and get scholarships, it’s our money to play with as we see fit. Probably pay for weddings with it...

[Mofo]

I recently went through all the pros/cons of a 529 plan VS a Roth IRA. I like the Roth better. I opened a Roth for my wife and myself. We will max both accounts out yearly and will have plenty for college and should have a good chunk left for retirement. I would look into them both and do what fits your goals best.

I did the same Cody, great minds think alike

[RJK70]

Roth IRA has income limits. So if you don’t qualify, 529 is a great option.


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