529 plans vary by state. Some states have really good plans and some states don't. I would suggest googling 529 plans by state and see what you can find. I found an article a while ago that gave you advice based on what state you live in.

This is an alternative. Roth IRA. You get the same tax advantages as a 529 plan except you have more investment options and there are no penalties for using it for non-education expenses.

If you use a Roth IRA you just take out the principle when your kid is ready for college just like you would take the money out of a 529 plan. If your kid decides to not go to college then you aren't stuck with a 529 plan.

If you are already maxing out a Roth IRA then a 529 plan is a great way to go, depending on your state, of course.

Also, if you don't like mixing retirement and college savings then there's no harm in a 529 plan. I can understand how someone wouldn't like to do that. It's just an alternative way of going about it.

I guess there is one drawback. With a 529 plan you will use the principle and the interest for college. With the Roth IRA you can only use the principle unless you want to pay penalties on the interest. So if you go the Roth IRA route you'll just have to note that the principle is for the kid and the interest is for your retirement. If you go with the 529 plan your kid gets everything.

Look into an Educational Savings Account (ESA), sometimes referred to as an Educational IRA. It works similarly to a Roth IRA, but is for education instead of retirement.

The drawbacks are that both income limits and contribution limits are pretty low, so if you are ineligible or need to save more, a 529 is the next best. Remember that you don't have to use the plan for your state, so shop around for the best value. 

marianner7:

Look into an Educational Savings Account (ESA), sometimes referred to as an Educational IRA. It works similarly to a Roth IRA, but is for education instead of retirement.

The drawbacks are that both income limits and contribution limits are pretty low, so if you are ineligible or need to save more, a 529 is the next best. Remember that you don't have to use the plan for your state, so shop around for the best value. 

There are a couple states with really good plans that can be worth it if your own state's plan isn't very good. I think there are usually some restrictions if you are using a plan from a different state than your own.

There are articles out there that will give you advice on which plan to use for each state.

Not to be a broken record, but the best thing you can do to save for your child's education is to save for your own retirement.  There are loans for college, but not for retirement (and between age discrimination, changing skill needs in the economy, and disability, many people find they are forced to retire earlier than they wished/planned).  There are loans for college, but there are no loans for retirement.

Assuming that you are actually successful at saving *enough* for both your own retirement and your child's education, there are various ways you can redirect excess retirement funds pay for college.  As others have said, you can withdraw the initial contributions from your Roth IRAs without penalty to pay for college.  If you do any rollover Roth IRAs from an employer sponsored 401(k) plan, those initial contributions can also be withdrawn without penalty to pay for college (so long as you do the rollover at least 5 years before the withdrawal).  You can also take out student loans (either in your own or your child's name, and probably at a pretty favorable interest rate) and pay those off using any retirement funds once you reach an age where you may draw freely on those funds (59 1/2, I think, but there are some OK options for withdrawing in your 50s too).

If you are not successful at saving enough for both college and retirement, your children can take out their own student loans.  Yes, it kind of sucks to have to pay back SLs, but it beats supporting your parents in their retirement, and it helps build credit scores.  

If, after maxing out your retirement, you can afford to refinance your house to a 15 year mortgage, consider doing that.  Yes, I know lots of people say you should pay off your house as slowly as possible with rates so low, but personally, I don't think it's smart to put all your eggs in one basket (even a diversified stock and mutual fund portfolio is pretty risky by itself), and a shorter mortgage term will lower your annual interest rate as well as your total interest paid.  If the mortgage is paid off before the kid(s) start college, you'll have a lot more cash in your monthly budget to go toward college expenses.  Having a lot of equity in your home also gives you some alternate options for paying for college.  In 2001, a lot of students in my class spent 2 years worth of college savings on just their sophomore year's tuition because the stock market was doing so badly.  My parents took out a HELOC at 4% and paid it off with the stocks they'd purchased with my education in mind AFTER the stock market recovered (they were also able to do this because they'd just purchased stocks and mutual funds in their own names and not part of a specific college plan, and because they had a lot of equity)... of course there is a risk there, but the more equity you have in your house to begin with, the less risk is involved.  Also, moving to a smaller home when the kids move out isn't such a bad idea, if you can handle it emotionally.  If you own the home you raised your children in outright at that point, you could split your equity between buying a smaller home in cash, and college expenses.  

Only after these things would I look into an ESA or 529 account.