OT: Soliciting College Savings Advice/Discussion

Some of my clients have invested some of the money earmarked for college expenses in a Universal Life Insurance policy.  You can invest the money to match your investor profile, it grows tax free, can be accessed via a policy loan and it doesn't create a tax liability. In addition, you're not tied to higher education expenses so if your children decide not to attend college or receive a scholarship all you've done is enhance your retirement.  To be honest, most people plan on using current income, some 529 money and some sort of third vehicle.  However, the 529 is a hot topic in Washington right now as Obama has proposed eliminating the tax benefits so there is a lot of uncertainty surrounding the vehicle.  It may not be a viable option very soon.  

Have 529's for all 3 of my kids (the twins going to school at the same time is going to kill me!)
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529s are great if you have relatives/friends that may donate as well.
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As long as you don't crazy over-fund them (virtually impossible with Ed skyrocketing)
You'll be fine.
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Also didn't see mentioned that they've evolved over the years, and you have many more choices in plan compared to the old days, & you can even switch states/plans regularly if your needs change.
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On iPhone, apologies if formatting sucks.

If certain the youngins will attend college, its a no brainer, vis a vis the tax savings.  Broader expenditures allowed than many believed--used part of my daughter's for her National Boards.

I'll say this much regarding Roths:  I started one 2 years ago and just bought my first house.  I withdrew all my contributions to pay for the downpayment.  No penalty, the money earned me some modest money while out in the market, then I pulled it.  Like you said, you can't pull the earnings without penalty, though, but you are kind of hedging your bets.  You get back what you put in for your kids and you earn on that money for your own retirement, I guess.

I look at the Roth as an emergency fund that can earn you some actual interest. 

Living in France, it's amazing that the richest country in the history of the world can't provide reasonably priced education and healthcare for its citizens.  Us citizens should demand better. 

The next bubble will be higher education, and it'll make the housing one look like small fries.

1. I suggest you take a look at reddit.com/r/personalfinance. If you read the FAQ, it will probably answer you questions. You could also search and find common answers. Lastly, you could post what you just posted with a bit more info and get some better responses than what you'd expect here.
2. "Roths withdrawn for education expenses are subsequently counted as income for the child one year later... so it's better to hold off on using a Roth until Sr year." I'm not sure what you're getting at here. If it's a Roth IRA in your name, then it's your money and I'm not sure why that would be counted toward their income. If you're talking about opening an IRA in your child's name, then the contributions cannot exceed their earned income each year. Considering that they are 10 years out, I doubt they have any, so I'm going to work under the assumption that you are talking about putting that money into your own Roth IRA.
3. The max on a 401k for 2015 is 18k. That doesn't include matching from your employer. If your employer isn't matching every dime that you are putting in, then you should take the amount beyond what they match and instead put that in a Traditional or Roth IRA. You and your wife can both have one, so that's 11k between the two of you.
4. If you go the above route and place whatever you're trying to save for college in a Roth IRA, everything that you put in is tax-free and penatly-free. Any growth is where you start getting hit with the 10% penalty. So, if you start contributing both retirement money and child funds into Roth IRAs, you have a lot of tax-free, penalty-free money to work with and a lot of growth remaining for your retirement.
5. Keep in mind that the tax break for a 529 is only at the state level. Based on what you've said, that means that you are probably looking at a deduction of ~6.5%. If your kids don't go to college then you pay 10%, so you lose 3.5% overall.
6. IRAs might not count against financial aid, but a high-income family will also disqualify your kids for a lot of financial aid. I don't know the formulas or what your plans are going forward, but the financial aid part might be a non-factor.
7. If I were in your shoes, I'd probably be looking at the 529 because of the deductions that you get now. In a lower tax bracket, a state with lower taxes, or a state that doesn't offer the deduction, I'd be looking at the Roth IRA.
8. I hope that your advisor's products are low-interest like Vanguard.

Use both a 529 plan and a non-qualified (no tax advantages) investment, like a brokerage account (in your name). Tax law is ever changing, what sounds good now may be moot in 10-15 years when you need the money. For the Roth, use an aged based mutual fund. This can start out as conservative or aggressive as you like and will automatically become more conservative as your children age and get closer to college age when they will need the money. This helps you manage risk very easily. For the NQ brokerage account, buy stocks and/or mutual funds. If your child never needs these funds, they are yours to keep with no penalty. If they do need them (after the 529 $ are depleted) you can gift the account holdings (as needed) to your child. He/she will likely be in a lower tax bracket at the time and therefore, pay a lower tax amount. Run this by your advisor (after he presents his advice). I have learned that flexibility in investments is a wonderful thing. Give yourself options.

Obviously there isn't one great solution otherwise you wouldn't have posted but there are multiple options so with planning you can build a good strategy that comes with options. 

With a Roth you can avoid distribution taxes/penalties by planning ahead to only use contribution money to fund college since it will be before age 59.5 (Roth contributions can be pulled out tax and penatly free after a five year holding period). The rest could wait for retirement. This idea does come with inflation risk for those dollars, not to mention the ever rising cost of tuition making those dollars that aren't growing look smaller and smaller every year. The bonus is that earnings buffer your retirement funds when you are ready to take a distribution, which hopefully will be qualified. 

There is the Coverdell ESA, which has major contribution limits but can be withdrawn tax free as long as the distribution does not exceed qualified education expenses. That makes this a good supplemental idea to cover what the other plans might not. 

The NY 529 makes the most sense, even if you are unsure about whether the kids will go to college, due to the deduction for NY residents. This is the only plan of these three where contributions are deductible. 

The Roth can provide a retirement buffer. The Coverdell would be the responsibility of the beneficiary at age 30 if they don't go to school and can be managed to be withdrawn tax free. The 529 provides a deduction and flexibility to choose beneficiaries. Combining a mix of all three alleviates some of the shortcomings of the others. A general idea would be 50-60% 529, 20-35% Roth, and 10-20% Coverdell or some sort of similar mix.

You may even want to keep some in savings until the kids get closer to college age, then max out contributions if you need to (with the exception of the Roth due to the 5 year holding period). Of course every situation is different and if you're managing this yourself then so many plans may seem a bit daunting, but smart planning can go a long way. 

Hope this helps. Cheers!

I didn't finish until I was 35 and I must be a cheap turd, but I paid well over 100k of college myself over the past 20 years, 50k at Michigan, 10k at a community college, another 15k at a private college, and another 40k in Cincinnati, and I kind of expect my daughter to foot a pretty good portion of her own bill. She can live at home and we'll provide a car as long as she's here, but... I did it and my wife did it. We're finally building up some equity and our daughter can probably either have inheritance or college money, but I think she can pay for her own.