Expert Q&A

Are there disadvantages to 529 college plans?

I am considering our alternatives to start saving for our son and it looks like the only option is to use a 529 plan, is that correct? Is this the best way to start saving for college and what are the disadvantages? Thank you

Related Topics: College Savings and 529 Plans, Financial Planning
Related Tags: 529 Plan, Disadvantages, College Savings
Patrick Herrero
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By Patrick Herrero - Asset Retirement Solutions
Answered over 4 years ago

529 plans are great vehicles to fund higher education the alternative is the coverdale but as it does have its limitations. People have used qualified money such as 401k and traditional Ira as well as Roth Iras but there is a flaw in this plan in it negatively effects your retirement fund and could effect your taxes. The ability to fund the 529 plans is greater than any qualified plan but it there is the 10% penalty if it is not used for qualifying expenses as well as some tax implications.

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