529 vs Roth IRA for college funding?

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  • March 5, 2024 at 6:19 pm #93329 Reply
    USER

      Hi, Me and my wife will be hitting 40’s next year and we have two kids 13 & 6. Annual house hold income is 250k and we just started on a concious effort to diversify our portfolio and attain financial independence. Equity in our home is 700k (70% of value) and 401k contributions of roughly 70k.Plan is to invest annual max in 401k & back door Roths.

      With all this planned, we don’t have any funds for kids college . Contemplating if we should start 529 ( living in tax free state) or use ROTH contributions for college tuition (5- yr withdrawal).

      Appreciate any suggestions.

      March 5, 2024 at 6:20 pm #93330 Reply
      Rick

        Are your kids considering a good ROI college experience or total waste of money college experience. This may impact your plans. If the former, invest in it. If the latter, don’t and sadly hope other tax payers will be saddled with that burden.

        March 5, 2024 at 6:21 pm #93331 Reply
        Wilson

          If you’re unable to meet your own retirement goals then I would first secure that prior to specific accounts earmarked for college.

          Maybe if there’s a state tax deduction you could make a case for funding that amount. It may not make a major difference for your 13 year old as 4-5 years is not that long for growth in the account.

          Would you also like to explore: Can we talk 529 plans?

          March 5, 2024 at 6:21 pm #93332 Reply
          Sean

            Neither. You have 70k saved for retirement. You can’t afford to pay for your kids college. They can take loans. If you eventually get on track for retirement then you can gift them money to payoff the loans later on.

            March 5, 2024 at 6:21 pm #93333 Reply
            Matt

              You can’t borrow for retirement. Make sure that is squared away first. Further, I’d strongly encourage you to challenge your kids to make the business case for attending an expensive on-campus bachelor’s degree program.

              Just going because they think it’s the next step is the wrong answer. They should have a well thought out plan for why a 4-year degree makes sense and fully understand the costs and payback.

              I wish I had done this with our two children.

              March 5, 2024 at 6:21 pm #93334 Reply
              Wendi

                You currently have $70k in 401k balances or you’re contributing $70k a year?

                If my balance was $70k, my priority would be my own retirement at this point, and cash flow what I could when needed for college.

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