Tom is a doctor, husband and father of five with a passion for parenting and finance. When he isn't skateboarding, riding BMX, or jumping on the trampoline with his kids, he is reading and writing about personal finance. He helps high income parents educate and mentor their kids to become financially, emotionally, and intellectually self sufficient.

7 Responses to “Which is Better, 529 Plan or Taxable Account?

  • Great post! I’ve got 529s on the mind, as we are expecting our second child in July.

    We have a 529 for our older child, but I haven’t yet gone through the exercise of whether a taxable makes more sense. Living in PA, they allow you to deduct contributions to ANY state’s 529 plan (we have the Vanguard plan from Nevada).

    However, PA has only 3% state taxes, so I’m not saving a crazy amount with that deduction. I’ll be testing out your calculators with some different scenarios!

    Take care,
    Dr. C

    • Thanks Dr. C. I use the Nevada Vanguard plan too. It’s been great for a no Income state like Texas. I hope the calculator is useful.

      Tom @ HIP

  • Awesome post!!! My wife and I put away a little bit each month for junior and soon to be junior’s brother. We figure slow and steady will win the race and hopefully cover the amount of tuition as they get older but then again who knows how expensive college will be in a couple of years 🙂

    Great post!!!

    • It’s one of the hardest things to predict. Who knows where the educational system will be in a decade or longer?
      We are doing the same thing for our kids. Hopefully it will work out. Thanks Rob!

      Tom @ HIP

  • Wow! This is an excellent resource, Tom. Currently, we are saving into a UTMA instead of a 529 to provide more flexibility with the money in the account. I need to do a more thorough analysis – and I need to do it soon. Our daughter is 8 months old and the time is flying!!!

    • It’s really hard to know where we will all be in 17 years 4 months but at least you’ve started saving. That’s the most important part.
      I hope the calculator helps you make some good decisions.

      Tom @ HIP


  • Our approach was a combo strategy. We contributed up to the state tax deduction ($2,500/year in Maryland for each of us) once we became a dual income family and then contributed the remainder to a taxable account. This gives us more flexibility if we didn’t need all the savings for education, to repurpose those funds for something else (like our own retirement).

    As it turns out, my oldest decided not to stick to college after one semester, so we in fact have ‘over-saved’ even though we can convert some of his 529 money over to his brother’s account (who starts college this fall). After 4 years of tuition for son #2 (with no scholarships, grants, or need-based aid BTW for us high-earners) we will still have some money leftover. I think we will sit on it until we are certain that son #1 will not return to college. We can always save for future grandchildren or gift it to other relatives.

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