529 vs Roth for Minor
Hello,
I am looking for information for the pros and cons of a 529 vs a roth for minor.
Note that a minor’s Roth IRA created from the limited taxable comp of a minor will not be qualified until the minor is 59.5 or disabled. This means that any gains generated in the Roth IRA will be taxable when withdrawn (but no penalty) to pay for the education costs. Conversely, gains generated in a 529 for that minor beneficiary will be tax free when distributed to pay qualified education costs. And Secure 2.0 also includes a provision that a 529 balance if not needed to pay qualified education costs can be later transferred to the Roth IRA of the 529 beneficiary after a considerable holding period. This goes a long way to prevent unused 529 funds from becoming partially taxable if not able to be applied to the qualified education costs of the beneficiary or their replacement beneficiary.
Permalink Submitted by BruceM on Tue, 2024-05-14 15:51
Not sure I understand your question.
Are you wanting to save for college using either a state 529 plan vs setting up a Roth IRA to receive contributions from the minor? Or is the Roth IRA to be set up by, say, a parent and the proceeds used to pay for future college costs?