How to Choose a 529 Plan: A Parent’s Guide to Smarter College Savings

When you become a parent, you start thinking long-term about your child's happiness, security, and future success. And when it comes to education, many parents hear that a 529 college savings plan is the best route to help their kids avoid student loan debt.

But with so many options out there, how do you choose a 529 plan that’s right for your family?

To answer that question, I sat down with Kelly Palmer, an advice-only financial planner and founder of The Wealthy Parent. Kelly specializes in helping millennial parents plan for their financial futures while still living a life they love. She shared expert insight on choosing the right 529 plan, alternative options like UTMAs and Roth IRAs for kids, and her unique approach to advice-only financial planning.

Here’s what I learned from Kelly about how to choose a 529 plan.

What Is a 529 Plan and Why Should Parents Care?

“A 529 plan is a special type of account meant to save and invest for college or other types of education,” Kelly explained. “It hopefully allows you to save some tax money along the way.”

She shared that while contributions are made with after-tax dollars, some states offer a tax deduction or credit, and the money grows and comes out tax-free if used for qualified education expenses.

“You might get a little juicy tax benefit at the state level. It grows tax-free and comes out tax-free for those college expenses,” Kelly said.

So, How Do You Choose a 529 Plan?

According to Kelly, there are three main things to consider:

State Tax Benefits
“If your state offers a benefit, it might make sense to use your state’s plan. But some states, like California, have plenty of taxes and no benefit,” she said. Use SavingForCollege.com to see what your state offers.
Plan Fees
“If there's no state benefit, you might look for a plan with lower costs. Utah’s my529 is well-known for being low cost.”
Ease of Use
“You might already have accounts with Fidelity or Vanguard. That can be a good reason to go with their plans, just make sure you're picking the low-cost investment options,” she added.

When Should You Open a 529 Plan?

“Once the beneficiary has a Social Security number, you can open the account,” Kelly said. “For most families, that tends to happen quicker than you might expect after birth.”

Even if you don’t have much to contribute right away, opening early lets your money grow longer. Plus, under the SECURE 2.0 Act, 529s can now be rolled into Roth IRAs (up to $35,000), but only if the account has been open for at least 15 years.

“If you have a young child, at least open the account, get it started,” she advised.

What If College Isn’t in the Cards?

Some parents worry that their kids won’t attend a traditional four-year college. Kelly says that’s a valid concern, but there are more options than you think.

“Let’s say worst case, you don’t need any of the money. It’s not the end of the world. You’ll pay taxes and a 10% penalty on the gains, but not the contributions,” she explained.

She also reminded parents that 529 funds can now roll into Roth IRAs, and the account's beneficiary can be changed to a sibling or even a cousin.

“There is wiggle room. While it can feel restrictive, there are ways to use the money flexibly.”

How Does a 529 Compare to Other Options?

UTMA (Uniform Transfers to Minors Account)

“The big difference here is control,” Kelly said. “When you put money in a UTMA, it's your child's. No take-backs.”

At age 18 or 21, the child gains full access to the funds, which could be a problem if they choose to spend it unwisely.

“You, as a parent, lose control. With a 529, the money can stay in there for years, and you're still in control.”

UTMAs also count more heavily against financial aid because they’re in the child's name.

To dive deeper into the pros and cons, check out our UTMA vs. 529 deep dive.

Custodial Roth IRA

“The big piece I think so many parents miss or don't understand with the Roth is that your child needs earned income to contribute,” Kelly emphasized.

Once your child has income, you can contribute up to what they earned or the annual Roth limit.

“It's a great account, but it's meant for retirement, not college savings,” she said.

For more, read how to open a custodial Roth IRA with Vanguard and how to hire your child.

Kelly’s Personal Strategy

Kelly Palmer, CFP and son at Oktoberfest

“I am a 529 gal,” Kelly shared. “We opened a 529 for my son, and we use it to get our state tax advantage.”

She and her husband also encourage grandparents and friends to give gifts to the 529 account instead of giving toys. “Especially for us city dwellers and minimalists, it's a great alternative.”

At the same time, they also save in a taxable brokerage account in their own name, earmarked for their son.

“That balances out some flexibility and tax advantages,” she explained.

If you want to create a customized plan for your family like Kelly has, I highly recommend booking a one-hour advice session through Nectarine. They offer advice-only planning with zero commissions, zero sales, and 100% focus on you.

Final Thoughts on How to Choose a 529 Plan

I’ve been a 529 fan since my daughter was born. Starting early made a huge difference. Now that she’s a teenager, the growth we’ve seen is substantial. We're north of $60,000 already! We didn’t contribute every year, but thanks to compounding, we still have a solid foundation.

Kelly Palmer's insights have reaffirmed my belief that the 529 is a smart choice for many families.

If you're looking to map out your college savings strategy, I encourage you to connect with Kelly through Nectarine. She's helped countless parents like you and me take the guesswork out of financial planning.

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Were you wondering how to choose a 529 plan? What do you think of the advice from Kelly Palmer?

Please let us know in the comments below.

June 24, 2025