A Roth IRA, which taxes income used to fund the individual retirement account but not earnings growth and withdrawals, can be used for educational expenses as well as retirement, and offers more investment choices, like individual stocks. But the accounts have income and contribution limits -- a married couple filing jointly with a modified adjusted gross income over $206,000 can't make direct contributions.
There are also custodial accounts known as UGMAs and UTMAs, which don't have to be used for educational expenses and can be funded with just about anything. But they don't have the tax benefits of a 529, and may reduce financial aid awards.
Milo Benningfield, a financial adviser in San Francisco, said that for some clients who want more control, he's set up separate brokerage accounts for educational expenses rather than 529s. They may not get the biggest tax benefit, but for some savers, the unlimited investment options are more important.
Benningfield said he didn't set up a 529 plan years ago for his son who's now college age because at the time, there wasn't the option to use the funds for private high school. Now that they can be, a new level of flexibility might make other 529-wary savers think twice.
This article was provided by Bloomberg News.