Robert Brokamp

What are the downsides of the 529 accounts?

Well, limited investment options.

529s basically offer a menu of mutual funds, or maybe ETFs, chosen by the state, sort of like a lot of 401 plans.

If you really want to buy individual stocks, for example, you can't do that in a 529.

And there are penalties for non-qualified withdrawals.

The money you contributed on an after-tax basis, that will come out tax and penalty free.

But the earnings portion that is withdrawn, not used for qualified expenses, will be taxed and subject to a 10% penalty.

Also, if you took a state income tax deduction on the contributions, but then didn't use the money for college, or in some cases, if you transfer that money to another state's 529, there may be a recapture of that deduction that you were able to take on the contribution.

So again, just

Do a little more research into what's available in your state.

And then the final downside, and this is just my opinion, it's not very fun for the kid to see the investment account grow and that it's used for college.

I like the idea of another account where they can use the money to do other things like buy a car, buy a house, take a trip, things like that.

That's just my personal opinion, but you may feel like, no, this is great for the kid.

They feel like they have skin in the game and contributing to their own education.

All right, so those are the five account choices.

Which one should you choose?

Well, that, of course, depends on your situation and preferences.

But the good news is that you don't have to choose just one.

I'll just tell you what my wife and I did.

So we opened up 529s for our kids soon after they were born and mostly stuck to the age-based portfolios offered in the plans that we sort of complemented them with more aggressive funds when they were younger.