What is a 529 Plan? A 529 is an investment plan specifically designed for a college education.
Now those are a lot of goodies, don’t you think? So, what are the drawbacks?
The Roth IRA is a retirement account that has morphed into something much more versatile in how it can be used. IF you have a good retirement fund elsewhere (401K, TSP, 457, 403b, SEP, Pension, etc.), you may consider using your Roth IRA as a way to fund your child’s education.
However, there are some drawbacks:
A Target Retirement Fund owns many types of assets, so you don’t have to do it yourself. Let’s say your child is 4 years old, and it is the year 2021. In 14 years (hopefully), that child will be ready for college, so you could choose to place his money in a 2035 fund. These funds gradually become more conservative in their investments as time goes on (less stocks and more bond). Let's look at the pluses.
However, there are drawbacks.
So where do we go from here? I would certainly encourage you to investigate all of your options before you invest your money. The Best Way to Save for College, A Complete Guide to 529 Plans, by Joseph Hurley, is a wonderful book that explains these plans all across the U.S.
BIG POINT: If you decide to go with a 529 Plan, DO NOT use a broker! Go directly with the state or Vanguard and avoid any commissions (you can Google your state 529 Plans and find the folks who run the program).
I would start investing immediately whatever option you select. I would contribute each and every month. I would encourage family members and friends to reduce the presents on their birthdays and Christmas, and instead, tell them that money put towards their college fund would be greatly appreciated.