529 Plan or IRA

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Love the question that we had just turned again. I'll feel yet. It has to do with Mark in San Jose was asking a good question. Now Mark was fifty nine something already late fifty nine in the late. Fifties fifty nine and he's got a son like a year and a half old fool, man. But okay. Hey, good for you. Good for you. If you can handle it. I am. I mean, I couldn't there's no way. But if you can handle it great. All right. So he's got but he wants to save for his for his education. And he's got a decent amount. He's been saving money into a five twenty nine to Brian. He's got enough to put away maybe to do both the five twenty nine and a Roth at his question was do. I do a five twenty nine plan or a Roth. Now the five twenty nine plan. Professor Plum, there is one available each state has their own plan at least one and you can put your money in any states plan doesn't have to be the one that that that you live in although many if not most offer states offer some decent tax state tax incentive of some kind for new except for the state that. Right now. The Mark living lives in California. Nah. You get nothing. And you'll enjoy it. It's the parents used to say you get nothing enjoy it. So like when we bugged by mom, what's for dinner poison and you'll like it. Yes. And you'll eat it. Yes. Rat innards just say poisoning disgusting. John. Never did that. I I she couldn't for me because she was a great cook. And we always had good dinners. Showy showing we still joke about Shelly blew it. Twice that I recall in your entire childhood on an experimental dinner. Yes. Okay. Yes. One of them was broiled bologna and cheese. What? Yeah. So she got it out of a cookbook somewhere and wanted to try. It was awful. I think they still use it as a doorstop. All right. So that was one. And then the other one was something called, Meatloaf, puff and chill. You can ask her about it. She just didn't work. Yeah. Didn't work and we loved Meatloaf. But this was awful. Anyway. All right. So but besides those two how did I get off on this discussion? All right. Besides those two. She always had good food. So she couldn't say anything. She was making was terrible. It was always delicious. Let's see. So I went from that. We're talking about five twenty nine plans can't recall. All right. Anyway on the five twenty nine plan. You can invest in anything. I mean any state's plan whether they give you a tax break or not, you know, that's entirely up to you. How you decide which you know, if you wanna use your own states or not, but the five twenty nine plan has limited investment options. Obviously, they're going to give you a less. You can invest in these maybe the only thing that has going for it perhaps is that with a Roth IRA you've got a limit of fifty five hundred or sixty five hundred dollars to contribute for year. Five twenty nine plans offer quite a bit more significantly higher. Limit. Yes. Significantly higher limits. Is it? Hundred thousand or technically it's five years of the annual gift so seventy five thousand dollars. That's what it was. Yeah. Thank you can go higher. Yeah. And there's that per year. No. That's just that's how much you can put in there. Well, no mean, you can continue to contribute until the account is in the quarter million dollar, right? Okay. Maybe that's what it was. Yes. Anyway. So you can put a whole lot more money in. But if you have that kind of money to put in I mean. I don't know. We came to the conclusion that the Roth IRA was a much better idea for our caller, Mark. Let's see if you can if you got one or the other you can't afford to do more. You can only afford to do the one or the other. Yeah. You start with the Roth fully fund the right? I mean, if you can only do five put five if he knew six, and you're fifty years of age or older put six in the Roth if you can do ten I sixty five hundred in the Roth, and then you can use the extra thirty five hundred. And the reason we say this because mainly mainly because of the flexibility both accounts five twenty nine and the Roth IRA you're putting post tax money. And so there's no deduction upfront will leave alone the state tax incentives, which may play a role, depending on your circumstances. We'll leave that alone this post tax money going into there's really no incentive for that. They both grow tax deferred potentially tax free. Depending on how you use the money. And when you take it out now for the Roth after five years and fifty nine half tax free for whatever use it for the earnings and the contributions with the five twenty nine. The tax rate only if it's used for higher education,

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