529 versus Roth IRA

Is there any reason I should consider a Roth IRA instead of a 529 plan for my childs education? My planner said the 529 can we withdrawn tax free while I'd have to pay a 10% penalty on a Roth IRA.
Please advise/suggest/recommend/educate/or wildly throw out your opinion.

Your contributions to the Roth IRA can be withdrawn tax and penalty free at any time for any reason, making this account flexible enough to fund both retirement and education.

The 529 plan is specifically for education, and as such if your child's education costs less than what you've set aside, and you then need the money for retirement, you'll likely owe tax and penalty to distribute those funds.

Save for retirement first - use a Roth IRA as it fits your requirements. Once you're confident in your retirement savings amounts and you have more funds to set aside (toward education), you can utilize the 529 plan and/or Coverdell ESA for that purpose.

BlankenshipFP-So should I max my Roth and my wifes Roth IRA's out before starting to fund an IRA or 529 plan for our child? I've asked this question to multiple people before and it seems to be a personal preference but what do YOU suggest?

Save for retirement first - use a Roth IRA as it fits your requirements. Once you're confident in your retirement savings amounts and you have more funds to set aside (toward education), you can utilize the 529 plan and/or Coverdell ESA for that purpose.
I think that statement is pretty clear. Max out the Roth IRA (as you can within the constraints of your MAGI), fund your 401(k) to the max available, and then as you happen to have money left over, consider placing some in a 529/Coverdell for your child's education.

The point is that you can find all kinds of places to give you a loan for college, and there are dozens of ways to reduce the costs - but no one will give you a loan to retire on, and there are few ways to reduce the cost of healthcare and "living".

It was clear, just got ahead of myself before reading the last paragraph.
thanks

Assuming that contributions will not cover educational expenses and earnings were withdrawn is this still a good idea over 529?

The IRA is for YOURSELF, not for your child. You will hopefully keep that money until retirement (59.5) when you can make withdrawals without penalty.

Blankenship has been telling you to think of YOURSELF FIRST, not your child. This is wise advice. As he points out, you can't borrow for retirement, but your kid can always borrow for school (or you and your spouse can instill a culture of excellence in your home, and demand your kid earn grades good enough to earn scholarships). IF AND ONLY IF you have funded your 401K to the max and your IRA to the max, THEN AND ONLY THEN should you consider funding a 529 for your kid.

And to clarify, as long as the Roth has been open for five years or more, even the growth can be used for higher education (even for your children) penalty free.

Ok, ok, ok, I got it me first and then our child. Let's fast forward to the possible situation (not anytime soon but I'm being hopeful) that I have maxed my 401k, maxed my IRA and maxed both vehicles for my wife. Now should I invest in a 529 or Roth IRA for my child???

This is secondary but really might need more immediate attention. My financial planner encouraged me to get going on a 529 plan (he didn't do it for commission since he encouraged a state run plan that I set up on my own) and actually said it is my responsibility as a parent to give my child every possible opportunity to succeed in life SO I should try and save enough for 100% of the tuition. I challenged him on this topic since my parents paid for roughly 10% of my schooling and I think I am more financially savy because of it. I have to watch what I spend and I have a feeling of personaly responsibility. Long story short he made me feel as if I am wrong for not wanting to pay for all of the tuition. I've had a rough go with planners so what is a guy to do with such poor advice?

If your child is not working, they don't even qualify for a Roth.

Dingo's right -- 529, because your kid would need income to put in an IRA, and presumably he or she won't have that for a long, long time!

As to this: Long story short he made me feel as if I am wrong for not wanting to pay for all of the tuition.
Sigh........

This is a two-part problem. The first, and perhaps the one with the least weight in your adviser's eyes, is that your adviser certainly gets commissions, or props, or "atta boy"s, if he can sell you on another investment vehicle. Make no mistake there.

The second is more imperative, and it's the fact that society now seems to think that if parents don't hand their children everything, from diapers to cellphones to cars to a multi-thousand dollar college education, then they are Very Bad Parents. And for some reason, modern parents care VERY MUCH about being judged as good parents, than any generation before them. That's why your adviser urged you in very strong terms to pay for college -- because in his mind, you would be a Very Bad Parent if you don't.

You said your parents paid only a small portion of your college, and you turned out all right. My parents paid for nothing, and I did well too, all the way to the Ph.D. I got scholarships and grants, and when those ran out, I got loans (and have paid about 85% of them off already, a mere five years out from the end of my deferral period). Perhaps it's because our parents instilled excellence in us. My dad told me from early days he wouldn't pay a dime toward college (because he considered it a waste for girls), so I knew it was up to me. I think when kids know very early on that college is their responsibility, they will do what it takes.

I don't know your financial situation. If you're filthy rich, or can otherwise afford it comfortably, why not pay for your child's education? But most of us are middle class, working class, or poor. It's ridiculous that we be pressured into saving for college, when that might be a gift beyond our ability to give. In short, use your own good sense. Can a person of your income, your class, your lifestyle, comfortably give a $60,000 gift to an 18 year old? And don't be guilted by fellow parents if you honestly believe the answer is "no".

Puck's right - as much as you may feel, as a parent, that you're short-changing the child by not giving them every possible opportunity, lessons taught to the child are far more valuable than money or gifts. Too often we (parents) think that providing opportunities to our children means to give them everything. It may sound corny, but remember the story of the butterfly's cocoon? If you "help" the butterfly break out of the cocoon, it is weak for lack of the experience...

And to clarify, as long as the Roth has been open for five years or more, even the growth can be used for higher education (even for your children) penalty free.Thanks, price - I had neglected to include that factor... I figured I could count on you (and others) to pick up the pieces where I've let them slip through the cracks!

Blankenship,

I'm just glad you tackled that 30 question manifesto from the other 529 post. I thought about it, but since I am on vacation in Austria I couldn't come up with the energy to do so. Thanks.

Ahh, I miss the days when I could drive an hour to Innsbruck or Salzburg...

Blankenship,

I'm just glad you tackled that 30 question manifesto from the other 529 post. I thought about it, but since I am on vacation in Austria I couldn't come up with the energy to do so. Thanks.
It was either that or continue studying for SEE Part II - responding to the post won out over memorizing the rules for the dividends received deduction and the gain recognition rules for S Corps...:eek:

It was either that or continue studying for SEE Part II - responding to the post won out over memorizing the rules for the dividends received deduction and the gain recognition rules for S Corps...:eek:

I don't blame you one bit. I believe I fell asleep just reading this post, in fact!
:D

Dingo,

I know what you're saying. I've been to about 45 different countries, but Salzburg, Austria is completely mind-blowing...wow! It's competely surreal.

Price,

Try to catch the "Sound of Music" tour. It takes you to some of the actual sites from the movie and you get to see some very nice scenery. I wish I could remember the name of that brewery I went to, but it was fantastic! Enjoy your trip!

Let me refresh your memory Dingo...it was Augustiner Brau. I just got back and I think I have finally arrived at the holy grail! Amazing beer, brewed by Monks for centuries and served straight out of the barrel (the wooden kind). It is hands down, the best beer I have had the priviledge of tasting. Wow, wow, wow. And believe me, I'm no rookie when it comes to beer. Gosh, where do I go from here? I think it's all downhill after Augustiner!

You guys are SO continental...:rolleyes:

(oops, that's another sarcastic post that needs to be weeded out!)

I know, but there's a price to everything. Now I'll have to sell one whole life policy to pay for the entire two week trip to Europe and still have enough left over to take the rest of the year off. What a drag.

This post is also sarcastic (more weeding required).:p

Just imagine the places you'd see if you would just begin hawking the bloated pig with lipstick!

<sarcasm alert><system shutting down><rasslin' video booting up>

You guys are too much... :)