If you’re in a position to put some money away for your childrens’ future college costs, a 529 plan is typically the most popular home for your savings. There are some tax advantages, you could get a deduction on your state’s income taxes, and heck, the accounts were created for college savings. But the knock on 529 plans is that they can be inflexible. Take money out for anything other than qualified educational expenses and you’re probably looking at a 10% penalty on the account’s earnings.
As an alternative, some people prefer to use a Roth IRA for college savings instead. You get great tax benefits, and many people don’t realize that you can withdraw funds before retirement age penalty free if they’re used for qualified educational expenses. So given the limitations of 529 plans, are Roth IRAs really a superior vehicle for college savings?