529 plan.
Good, but not always the best.

What a 529 is

A 529 plan is a state-sponsored education savings account. Every state offers at least one, and most states offer two or three (direct-sold vs advisor-sold). You make after-tax contributions. Growth is tax-free. Withdrawals are tax-free if used for qualified education expenses: tuition, fees, books, required supplies, room and board, and, under the TCJA and SECURE Act, up to $20,000 per year of K-12 expenses (post-OBBBA, starting 2026) and up to $10,000 lifetime of student loan principal repayment per beneficiary.

In most states, contributions are also deductible against your state income tax, up to a state-specific annual limit. These deduction sizes vary wildly: New York allows $10,000/yr per couple, Illinois $20,000/yr per couple, Colorado $39,200/yr per couple per beneficiary, California offers $0. The size of this deduction is the main thing that determines whether a 529 beats a Roth IRA for your household.

The mechanics, line by line:

• Contributions: after-tax. No federal deduction. Many states offer a state deduction for in-state plan contributions.
• Growth: tax-free.
• Qualified withdrawals: tax-free. Covers tuition, fees, books, supplies, room and board, computers verify×DON'T TRUST, VERIFYClaim: 529 qualified expenses include tuition, required fees, books, supplies, required equipment, computers, and room and board for at least half-time students.Verify at: IRS Topic 313 ↗ and Publication 970 ↗ Source 1 in the list belowAlso includes up to $20,000/yr K-12 tuition and up to $10,000 lifetime for student loan repayment..

Starting a 529 at birth with $100/month at 7% grows to roughly $43,000 by age 18.

529 vs Roth IRA for college savings

The honest comparison most advisors will not make, because they earn a fee on the 529.

Rule of thumb: if your state gives you a meaningful deduction (something like New York's $10K/yr, which is worth roughly $1,000/yr in state tax savings at a 10% marginal rate), the 529 wins on raw math. If your state gives no deduction (California, Florida, Texas, several others), the Roth IRA wins on flexibility and usually on net math once you factor in the risk that the kid does not go to an expensive college.

The 529 to Roth rollover rule

SECURE 2.0, effective 2024, added a provision that lets you roll unused 529 funds directly into the beneficiary's Roth IRA. This changed the math significantly. The rules under SECURE 2.0 Section 126 verify×DON'T TRUST, VERIFYClaim: SECURE 2.0 Section 126 allows 529-to-Roth IRA rollovers with a $35,000 lifetime cap per beneficiary and a 15-year account minimum.Verify at: SECURE 2.0 Act ↗ and IRS guidance ↗ Source 2 in the list belowSection 126 of SECURE 2.0. Additional IRS guidance issued in subsequent years.:

• Lifetime cap: $35,000 per beneficiary, ever.
• Account age requirement: the 529 must have been open for at least 15 years before the first rollover.
• Annual limit: subject to the normal Roth IRA annual contribution limit ($7,500 in 2026) and requires the beneficiary to have earned income in that year.
• Contribution recency: contributions (and earnings on them) made in the prior 5 years cannot be rolled over.
• Beneficiary Roth: the rollover goes into the beneficiary's Roth, not the account owner's. The kid ends up with a Roth balance funded by their 529.
• Earned income: beneficiary must have earned income at least equal to the rollover amount.

The upshot: even if your 529 overfunds the actual education cost, up to $35K of the leftover can be converted to retirement money for the child without any penalty.

What happens if the kid does not go to college

Several off-ramps, in rough order of preference:

• Change the beneficiary. You can redirect the 529 to any "family member" of the original beneficiary (siblings, cousins, yourself, a future grandchild) tax-free and without limit. This is the most common solution.
• Use for the original beneficiary's graduate school. Or a trade school, apprenticeship program, or other qualified educational institution.
• Roll to the beneficiary's Roth IRA. Up to $35K lifetime under SECURE 2.0 rules above.
• Leave it for the beneficiary's future kids. A 529 can be a multi-generational vehicle with beneficiary changes.
• Cash out and pay the penalty. 10% penalty on earnings plus ordinary income tax on earnings. Original contributions always come out penalty-free. A scholarship exception waives the 10% penalty up to the scholarship amount.

Superfunding

A unique 529 provision: you can gift up to five years of the annual gift-tax exclusion at once without triggering gift tax, as long as you elect to spreadSpreadThe gap between two prices or rates. In trading, it is the difference between the price buyers pay (ask) and the price sellers get (bid). Many Bitcoin apps and money-transfer services also build a markup into the price they quote you, a cost on top of the advertised fee even when that fee is $0.Full definition the gift on Form 709 over the five years. For 2026, that is $95,000 from one parent or $190,000 from a couple, all contributed in year one.

This is an estate-planning move for grandparents or high-net-worth parents. Moves a large chunk out of the taxable estate. Starts the tax-free compounding immediately. Gets the money growing five years earlier than a normal annual gifting schedule would.

The annual gift-tax exclusion for 2026 is $19,000 per person per recipient verify×DON'T TRUST, VERIFYClaim: 2026 annual gift tax exclusion is $19,000 per person per recipient, subject to inflation indexing.Verify at: IRS gift tax FAQ ↗ Source 3 in the list belowIRS publishes annual exclusion amounts each fall..

Why it matters: $95,000 invested at 7% for 18 years grows to roughly $321,000. $19,000 per year for 5 years at 7% grows to roughly $282,000 by year 18. Superfunding advantage: about $40,000. If you have the capital upfront, superfunding dramatically outperforms annual contributions.

Why Bitcoin is not a good college savings vehicle

Bitcoin is a long-durationdurationA measure of how sensitive a bond price is to interest rate changes. A bond with 10-year duration falls roughly 10% in price when rates rise 1 percentage point. Longer duration = more interest rate risk. asset. College is a short-duration expense with a fixed deadline. The kid turns 18 whether Bitcoin is at the top or the bottom of a four-year cycle. Past cycle drawdowns of 50%-80% mean the tuition fund could be halved right before the first tuition bill is due. That is a real risk you do not want to take with a check that must be written on September 1 of a specific year.

Use the 529 or the Roth IRA (or a plain taxable brokerage account) for the college fund. Hold Bitcoin in a separate long-duration bucket that is not earmarked for any fixed-date expense. Mixing the two is a failure mode, not a strategy.

Best state 529 plans

You do not have to use your home state's 529 plan. The tax-free growth and the $35K Roth rollover apply to any state's plan. What you do need to use your home state's plan for is the state-tax deduction (if any).

Recurring top performers in Morningstar and Saving For College rankings:

• Utah my529: low-cost, strong investment lineup, available to out-of-state residents.
• New York 529 Direct Plan: Vanguard-managed, low fees, the default for NY residents chasing the deduction.
• Nevada Vanguard 529: low cost, no state tax advantage (since Nevada has no state income tax) but easy to use.
• Massachusetts U.Fund: Fidelity-run, low fees, solid menu.

You can use any state's plan for any school in any state. Pick based on investment options and fees.

Saving for College ↗ maintains current rankings and fee comparisons.

Practical rule: if your home state's deduction is $0 (California, Florida, Texas, Nevada), pick the best plan available (Utah or Nevada typical). If your home state's deduction is meaningful, use your home state's plan to capture it.