Education PlanningRoth IRAs vs. 529 Plans

The back-to-school season can be a great time to consider how you plan to help your children or grandchildren fund their higher education.

529 plans are a popular savings vehicle and have continued to gain popularity since the Tax Cuts and Jobs Act changed the law to allow distributions to be used to cover the cost of attendance at a public, private, or religious K-12 school, in addition to higher education.

A Roth IRA can also be a viable option to help fund college expenses. While a 529 plan does come with special tax breaks, a Roth IRA can provide more flexibility, allowing you to earmark as much or as little as you want for higher education expenses.

To learn more about these two options, click here to download “Planning to Save for High Education: Roth IRA vs. 529 Plan.”

For professional assistance with your education planning needs, contact our office at (425) 252-4032 to schedule a time for a visit.

This material was prepared by Ed Slott. Ed Slott is not affiliated with Bailey Wealth Services or LPL Financial.

A Roth IRA offers tax deferral on any earnings in the account. Qualified withdrawals of earnings from the account are tax-free. Withdrawals of earnings prior to age 59 1/2 or prior to the account being opened for 5 years, whichever is later, may result in a 10% IRS penalty tax. Limitations and restrictions may apply.

Prior to investing in a 529 Plan investors should consider whether the investor’s or designated beneficiary’s home state offers any state tax or other state benefits such as financial aid, scholarship funds, and protection from creditors that are only available for investments in such state’s qualified tuition program. Withdrawals used for qualified expenses are federally tax free. Tax treatment at the state level may vary.

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