College Savings for Kids

[ERICOPOLY]

I really don't like the investment options so I've stayed away from the 529 plans.

It only takes a few percentage points of underperformance to offset the small state income tax benefit, so it might be easier to just put your own money into an index fund.

 

Isn't the major benefit that the gains are untaxed if used for qualifying expenses?

 

It also reduces your taxable estate, yet you can revoke the funds at any time.  So it's sort of a nice way to start gifting them money while still being able to take the money back if you change your mind later on.  You retain full control even though it's outside of your taxable estate.

 

Then once you've died and the kids have the money, they can avoid the penalties even if they spend it on a house instead of education (however they would still owe the income tax).  I think of it like a way to fund an IRA for my kids.  Better, it would pay for their kids' educations tax-free.