Posted: 8/14/2025 4:38:21 PM EDT
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I am looking to find out what is the best option to save for my baby. I just had her a few weeks ago and I want to start investing for her as soon as possible. I was told to do a 529 account, but wanted to know if there is anything else out there that is a better option, not just for college, but in general. Any advice is appreciated! |
| I started a 529 for my kid when she was born. It's grown quite well in 21 years. She successfully done three years on scholarship so it's still sitting there. They changed the rules on them last year so you can roll it over to a Roth at some point. Whatever she doesn't need I'm jumpstarting a retirement fund for her. |
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529 is for educational purposes only. There is currently a small ability to transfer some to a Roth IRA later, but that means 15 plus years later and only up to 35,000 with some other caveats. That’s why I think of it as primarily for educational purposes only. Good news is that it is not tied to a particular school like some state college programs. It worked well for us. I would do it direct with a major broker like Schwab or Fidelity to avoid paying advisor fees. |
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Originally Posted By NotIssued: UTMA is another option to research. 529 restricts the money to be used for education only. Roth rollover of a 529 is limited to $35k. |
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Originally Posted By Morgan321: this is most likely a better option. Kid can take money to pay for school and pay 0% long term capital gains tax. If they don’t go to school they still get zero taxes and can use the money for anything they want. 529 restricts the money to be used for education only. Roth rollover of a 529 is limited to $35k. Except the UTMA becomes "their"money at 18 and they can do whatever they want with it. |
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Originally Posted By medicmandan: I started a 529 for my kid when she was born. It's grown quite well in 21 years. She successfully done three years on scholarship so it's still sitting there. They changed the rules on them last year so you can roll it over to a Roth at some point. Whatever she doesn't need I'm jumpstarting a retirement fund for her. FPNI |
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Originally Posted By PPMama80: I am looking to find out what is the best option to save for my baby. I just had her a few weeks ago and I want to start investing for her as soon as possible. I was told to do a 529 account, but wanted to know if there is anything else out there that is a better option, not just for college, but in general. Any advice is appreciated! Looks like Nevada has several plans with different state grant match options. Nevada Plans 529's are an excellent way to save for college and/or give them a headstart with a Roth IRA. Not sure if you state has tax benefits as well. Imagine having $35,000 in a Roth at 18 years of age. That's a great nest egg. |
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Originally Posted By medicmandan: I started a 529 for my kid when she was born. It's grown quite well in 21 years. She successfully done three years on scholarship so it's still sitting there. They changed the rules on them last year so you can roll it over to a Roth at some point. Whatever she doesn't need I'm jumpstarting a retirement fund for her. Cool. I used to do them for clients back when I was in the business. I have not stayed up to date on them since then though. |
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One of the big changes a few years back was being able to use it for K-12. I have 13-14 years of Catholic school tuition ahead of me, and I'll be sixty-six when my son graduates high school. |
"Whisky for the gentlemen that like it. And for the gentlemen that don't like it - Whisky!" -Alec Guinness as MAJ (acting Colonel) Jock Sinclair, D.S.O., M.M. "Tunes of Glory"
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One caveat to rolling a 529 plan over to a Roth is spelled out in the Annual and Lifetime Limits: The annual rollover amount cannot exceed the Roth IRA contribution limit for that year (less any other IRA contributions the beneficiary made). There's a lifetime limit of $35,000 that can be rolled over per beneficiary. So you can't just do a lump sum conversion, which is what most people envision doing. |
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Here are some real numbers. I opened one for my kid in 2017 and have put in 55k since then. In PA we can deduct 529 contributions from our state taxes so that has helped. Since 2017, the account has made 44K in interest, mostly in a Vanguard S&P 500 index fund. 44k in tax free interest sounds pretty damn good to me. 3 years to go before college, hoping by then to have $140k or so which according to the online calculators should about cover 4 years at a PA state university. So far she says she wants to be a teacher so even if I have money left, she will likely need to get a master's degree so we could use it there or I could change the beneficiary hopefully someday to grandkids. |
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Originally Posted By zephyr: Here are some real numbers. I opened one for my kid in 2017 and have put in 55k since then. In PA we can deduct 529 contributions from our state taxes so that has helped. Since 2017, the account has made 44K in interest, mostly in a Vanguard S&P 500 index fund. 44k in tax free interest sounds pretty damn good to me. 3 years to go before college, hoping by then to have $140k or so which according to the online calculators should about cover 4 years at a PA state university. So far she says she wants to be a teacher so even if I have money left, she will likely need to get a master's degree so we could use it there or I could change the beneficiary hopefully someday to grandkids. My experience: daughters started in 2011. I looked a few hrs ago. 80k put in, 38k interest, 120k total. Money is in a 2030/31 targeted fund. She's starting 7th grade next week. Started a UTMA for her in January. |
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Originally Posted By Morgan321: this is most likely a better option. Kid can take money to pay for school and pay 0% long term capital gains tax. If they don’t go to school they still get zero taxes and can use the money for anything they want. 529 restricts the money to be used for education only. Roth rollover of a 529 is limited to $35k. How are you getting by with zero tax on a UTMA? My kids have both UTMA and 529. Each serve their purpose. I hope neither of them use all of their 529 for college- and if that's the case they can just take a distribution on the remaining balance, pay the 10% penalty, and pay the tax. |
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Originally Posted By BPR: How are you getting by with zero tax on a UTMA? My kids have both UTMA and 529. Each serve their purpose. I hope neither of them use all of their 529 for college- and if that's the case they can just take a distribution on the remaining balance, and pay the 10% penalty and tax. Keep in mind only the profits are taxed, so if the UTMA is 50% principal and 50% profits your kid could withdraw $94k per year while in college and pay no taxes. UTMA is much more flexible and can pay for anything - a car, education that a 529 doesn't cover, down payment on a house, or anything else you can imagine. A 529 usually gets you a state tax deduction for contributions, so if you live in a high tax state and want that your kid can withdraw UTMA cash each semester at 0% tax rate, give you the money which you put into your state's 529 to get the deduction, and then immediately withdraw the 529 money to pay for the current semester. The benefit of this is that you are getting a deduction equal to the principal PLUS profits (when you're older and presumably in a higher tax bracket) while if you do 529 only you only get to deduct the principal (when you're younger and presumably in a lower tax bracket). It does require that you raised your kid to be responsible with money. |
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I have 529 and Roth plans for both my kids. The 529 is useful as a fund and forget investment. If you are savvy with investing, I am positive that you can get much better returns than what you are allowed to with 529 plans. I know that I am not, and I wanted to “fire and forget.” The 529 plans, much like any retirement accounts rely on time and compounding to really shine. If someone is using them for k-12, why bother? Why send it to a 529 and then pull it out immediately. The only time it makes sense if you invested for an older sibling and you still had money in the other kid’s account that you transferred to a younger sibling. Also applies if you know that the 529 plan will NOT cover all of college (or post) and you plan on shelling out money to bridge the gap, makes sense to pay the earlier years that way and have the 529 for the later years or for the post college. I am not a financial advisor, but I have read the fine print. I recommend you do the same for your state specific and federal 529 rules. Its enlightening. |
Words fall from your mouth like shit from ass.
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I started a Roth for all of my kids and pay them as employees. If you can it’s much better than 529. If I put in from 4-18 they will have over 1m by time they retire. Tax burden is low because they don’t make much. If they blow it at 18 they deserve whatever they get,my job is finished. |
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Originally Posted By rvbrewer625: I started a Roth for all of my kids and pay them as employees. If you can it’s much better than 529. If I put in from 4-18 they will have over 1m by time they retire. Tax burden is low because they don’t make much. If they blow it at 18 they deserve whatever they get,my job is finished. As stated above, do both. |
Words fall from your mouth like shit from ass.
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We started and funded a 529 for both of our kids and have stopped contributing to them. They are both around $75k and the kids are 8 and 11. I opened a UTMA last year for both and will put $1K-$5K a year into them as funds are available. We'll work to get them into a ROTH as they get older, but the key to me is a nice blend of pre and post-tax money for them. |