Roth IRA as a 529 alternative
Are there benefits and/or concerns to establishing a Roth IRA to be used for college education rather than a traditional 529 plan?
Are there benefits and/or concerns to establishing a Roth IRA to be used for college education rather than a traditional 529 plan?
Permalink Submitted by Alan - IRA critic on Wed, 2024-06-05 17:21
The Roth IRA is generally not a better alternative to a 529 for higher education costs, because 529 gains are tax free when withdrawn for qualified HE education expenses, whereas Roth gains will be taxable, but not subject to the penalty. In addition, some states offer a deduction for 529 contributions, and there is no deduction for Roth contributions.
Sec 126 of Secure 2.0 will allow limited 529 balances not needed for education to be rolled into a Roth IRA for the 529 beneficiary if certain conditions are met, preventing these funds from remaining trapped in the 529.