ROTH versus 529 college planning- a CPA’s perspective

September 10, 2015by Jon Dockery0

It’s surprised me how many times this topic has come up in my accounting work recently.  It could be that college just started back and people are keenly aware of the ever increasing cost of Junior’s education.  Thus, parents are often conflicted with the enormous burden of higher education expenses and the realization that they are responsible for funding their own retirement.  To add to the stress, they are inundated with information on College 529 plans and ROTH IRA’s.

So here’s the question I always get “Where should we put the money and which comes first?”  The answer to this question is very dependent of personal situations, but my initial advice is to always take care of retirement first.  When you get to retirement age, the sources of money are limited, so you better have planned well.  If not, you may be fighting for one of those scarce Wal-Mart greeter jobs.  While maybe not ideal, your children have other options to pay for school from savings, scholarships, part-time jobs, and as a last resort borrowing.

If the situation is right, a ROTH IRA does provide some powerful flexibility in saving for the future. While your investable dollars added to a ROTH can be used for both Retirement and college expenses, you have to remember that those dollars can’t be used for both goals.  You need to use this wonderful tax advantage account prudently as part of your overall financial plan.

Do you have a plan to navigate the path of funding college education without sacrificing your own retirement happiness?  We can provide clarity and experience that can help you utilize these options to meet your goals.

Jon Dockery

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