Question: Are 529 college savings plans worth it?

Hi Jose, we have young children and are considering starting a 529 savings plan. But we've also talked to other parents who aren’t doing them because they worry: what if their kid doesn’t go to college? Right now, we’re just setting money aside in a regular bank account. What do you think?

A:This is a great question—and one I hear all the time from young families. Honestly, it’s something I’ve struggled with too, even being in the financial industry and a parent myself. The concern isn’t just about the account itself, but about the changing landscape of education.

Community college is becoming more affordable—sometimes free. Some kids head straight into trades, apprenticeships, or other paths that don’t involve traditional college. So it makes sense that families are hesitant to lock money into an account that’s strictly for education.

That said, the 529 plan has evolved in recent years—especially with updates from the SECURE Act. Now, if you don’t end up using the funds for education, you may be eligible to roll a portion of the money into a Roth IRA for your child (as long as the account has been open for 15 years and some other rules are met). That’s a huge plus because both 529s and Roth IRAs are funded with after-tax dollars and grow tax-free under certain conditions.

Also, many people don’t realize that 529 plans can be used for more than just college. They’re allowed for:

·         Accredited trade or vocational schools

·         Qualified private K–12 tuition (up to $10,000/year)

·         And if your child ends up not using the account, there’s only a 10% penalty on the earnings, not on your original contributions.

But if you’re still not sold on the idea, there are other flexible savings options to consider:

1. UGMA/UTMA Accounts:These are custodial accounts where the child takes full control at 18 or 21, depending on your state. You retain control while they’re minors, but once they hit the legal age—they own it. Some parents like the idea; others worry about handing that much money over to a teenager.

2. Joint or TOD (Transfer-on-Death) Brokerage Account:This is what we do in our household. My wife and I have a regular investment account earmarked for our kids. We maintain full control over it, and the flexibility is unbeatable. If one of our kids needs help—car breaks down, wants to study abroad—we can step in. Plus, we can guilt-trip them a little for fun (kidding… kind of). It gives us flexibility and control without locking up the funds.

So, to sum it up:

·         529s are still a solid option, especially with the Roth rollover rule.

·         But they’re not the only way. You can mix and match depending on your goals, comfort level, and your child's future plans.

If you want to dive deeper into which strategy fits your family best, I’m happy to chat more.

*Consider the investment objectives, risks, and charges and expenses associated with municipal fund securities before investing.