Ask Money

A 529 plan before kids?

Chris Farrell Dec 4, 2009

Question: I’m currently single and about to turn 30. I have been able to live below my means since college, saving about 30% of my income per year. To date I have put these into maxing my 401k as well as contributing to both Roth and regular IRAs (as tax appropriate).

I’m planning on starting a family in the next few years. When should I begin to think about saving for future children’s college educations? Should I be investigating 529 plans or would general savings be more prudent? Charles, New Haven, CT

Answer: Wow. You are a good saver. I wouldn’t worry about a 529 plan now. I wouldn’t get ahead of yourself.

Instead, just keep on adding to your general savings. By the way, I think putting most of your savings into taxable accounts is a good way for most people to set money aside for college. Yes, you lose the 529 plan tax-free withdrawal if the money goes from for qualified education expenses. But you gain the flexibility to do whatever you want with the money without paying a penalty–to fund a career change, your retirement, the trip of your dreams and, yes, a child’s college education.

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