11 Smart Alternatives To 529 Plans For College Savings
Even though 529 plans offer tax advantages and are a popular choice for college savings, they’re not always the most flexible or comprehensive solution. Depending on a family’s financial goals, time horizons and risk tolerance, other strategies may align better or complement a 529.
From custodial accounts to Roth IRAs and even life insurance structures, there are options worth exploring that provide different kinds of control, access and tax treatment. Below, Forbes Finance Council members share 11 practical ways families can think beyond the 529 when saving for college.
1. Leverage Cash Value Life Insurance For Flexibility And Protection
I value cash value life insurance for its flexibility and built-in protection—it can complete itself if something happens to the payor. It’s also a smart college savings tool, offering tax-advantaged growth and stability. Of course, this all works best when you’re planning ahead and giving it time to grow. – Cesar Lopez, Insurance Advisors Global
2. Explore Real Estate And Bonds For Long-Term Education Funding
Planning ahead is part art, part strategy. Education costs are uncertain, and flexible savings tools matter. Real estate stands out—generate early passive income, build equity and use it for college or let it grow if plans change. Less liquid options like bonds offer safety but less adaptability. – Cynthia Hemingway, Fourlane, Inc.
3. Involve Your Children In Matched Savings To Build Ownership
Create a savings plan with your children that matches three times or more of what your children save. Your children should be able to earn from part-time jobs so they can put their savings toward their education. I am GenX and paid 100% of mine by working as a teenager, but I understand most kids can’t do this today. – Dave Sackett, Persimmon Technologies Corp.
4. Tap Into A Roth IRA For Tax-Free Growth And Financial Aid Benefits
Besides a 529 Plan, a Roth IRA is a strong alternative for college savings. It offers tax-free growth and flexible withdrawals for education expenses and doesn’t count against financial aid eligibility. However, using a Roth IRA may impact your retirement savings, so balance both goals carefully. – Tomas Milar, Eqvista Inc.
5. Automate Early Contributions To Maximize Long-Term Growth
The most important strategy for saving for children’s college funds is to set up an automatic savings plan as soon as possible, preferably when they’re born so that funds are automatically deposited into an investment account. The automatic savings component and starting early are more important than the investment vehicle, although the investment should be safe and secure. – Kevin Cohee, OneUnited Bank
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6. Utilize Custodial Accounts For Broad, Education-Adjacent Flexibility
Another alternative strategy is to use a custodial account, such as a UTMA or UGMA account. These accounts allow parents to invest on behalf of their child, with fewer restrictions on how the funds can be used, whether for college, trade school or another need. However, the assets become the child’s property at the age of majority, which varies by state. – Crystal Gilmore, The Spearhead Group Inc.
7. Open A Taxable Investment Account For Full Control And Customization
A taxable investment account is a strong option in addition to a 529 plan. It offers flexibility, no contribution limits and broad investment choices. To minimize the impact on financial aid, the account should be owned by the parent, not the student. – Letitia Berbaum, Blue Sands Wealth
8. Structure An IUL Strategically For College, Retirement Or Legacy Goals
An IUL can be a powerful alternative. It offers tax-deferred growth, tax-free access when structured right and doesn’t count against FAFSA. Plus, unlike a 529, unused funds can be redirected for retirement or legacy—it’s a flexible, strategic tool when designed with the right structure. – Terry Lamb, TLAMB INC.
9. Rely On Series I Bonds For Low-Risk, Tax-Advantaged Stability
It’s not flashy, but U.S. government savings bonds—like Series I Bonds—are a smart, low-risk way to save for college. They earn interest, adjust for inflation and are tax-free if used for qualified education costs. Plus, they don’t hurt financial aid eligibility like assets in the child’s name often do. It’s steady, secure and backed by Uncle Sam. – Karla Dennis, KDA Inc.
10. Align College Savings With Your Child’s Broader Life Trajectory
Saving for college is about more than covering tuition—it’s about investing in your child’s future. A Roth IRA or other flexible accounts can align with long-term goals and values, especially when education paths may shift. Think about how your strategy supports their path forward. – Sonya Thadhani Mughal, Bailard, Inc.
11. Treat Education Funding As Part Of A Holistic Wealth Strategy
Rather than saving specifically for kids’ education, try managing your net worth as a holistic portfolio with long-term goals. By building a diversified portfolio, generating passive income and maintaining sufficient liquidity, you can finance your children’s education with financial peace of mind. – Andrew Izyumov, 8FIGURES AI Investment Advisor
The information provided here is not investment, tax, or financial advice. You should consult with a licensed professional for advice concerning your specific situation.