The Best Way to Save for College

529 Plans

Up to this point, I’ve written mostly about retirement savings. One of the big themes for retirement savings is managing your taxes effectively. Doing so can result in having thousands more dollars than you otherwise would have had. The same goes for saving money for your kids, particularly for college.

Alternatives to 529s

If you’re using the funds for education, using a 529 is a no-brainer. I like the tax advantages of 529s, but the penalties for using it on non-educational expenses aren’t trivial. Let’s take a look at other options for college savings.

Crunching the Numbers

As I mentioned, if you’re going to use the funds for education, a 529 is by far the best option. Let’s see how using a 529 plan could help little JJ in the future.

Which Account is Right?

In my previous articles, after running the numbers, there was a pretty clear cut winner. But this week, there are pros and cons to using either a 529 account or a taxable investment account. I played around with a few different numbers and I couldn’t find a realistic scenario where one option was clearly better than the other.



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