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[quote=Anonymous][quote=Anonymous][quote=Anonymous]I realize I’m in the minority, but I’m not sold on a 529 to fund college, and I’m wondering if it’s really a better deal than a Roth in our situation. We have one kid so just one shot at the 529. DH and I will turn 59.5 in her third year of college, assuming she goes to college directly after high school, so could use the Roth to pay for her last years of college penalty free (and I think the first years of contributed income minus earnings before we turn 59.5). If we don’t use it, we can bank it for retirement. Why do most parents use a 529 instead of other more flexible vehicles? Are the tax benefits that much better to outweigh the lack of flexibility? What are we missing? We live in MD. Thanks.[/quote]

529s lack some flexibility and Maryland has low deduction compared to other states. I lived in a state (Missouri) that has a high deduction limit 16K for married couples filing jointly, on *any* 529 plan. Maryland has a measly $2500 (probably 5K deduction filing jointly) for a Maryland plan. So, no, tax deduction wouldn't be an incentive.

The real incentive for us is income limits- there are no income limits to open a 529 and the contribution ceiling (30K for a married couple filing jointly) is much higher than a Roth, before you have to deduct from lifetime gift tax. Other family members might be able to contribute as well in a tight year (we don't have any rich family but I'm sure someone does). The drawback of course is that we would owe taxes on the earnings if DC didn't attend college- no 59.5 age limit for that.

I hope I got all of that right.

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also, no, we're not wealthy, but we have one kid and make too much for a Roth. If that's likely to happen to you, (income goes up and you can't contribute anymore- more money is a good thing right?) then your college savings plan may need re-structuring. [/quote]

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