I can open a 529 account for the unborn babies setting beneficiary to myself, then rollover to their Roth IRA. The baby's future is set. How can I maximize this strategy?

Hi Money Minder,

So, I just landed a new job and now I’m all about planning for the future with my girlfriend. We’re big on saving and not really splurging on fancy meals out. The plan is to max out Roth 401 / Roth IRA / HSA because we’re pretty frugal.

We’re also thinking about having two little ones down the line. My childhood was a bit rocky financially, so I want to make sure my future kids have it better. I’ve been looking into college savings plans like 529 Plans, but I’ve got some burning questions that need answers.

I’ve heard that if my kid decides not to go to college, I can roll over funds from a 529 plan into their Roth IRA. Does this mean I can set up a 529 account for unborn babies, change the beneficiary later, and then roll over funds into their Roth IRA?

Also, if the kids do want to go to college, can I still use the Roth IRA rollover option up to 35k? I was thinking of investing heavily in two 529 accounts to cover college and the rollover amount, is that a feasible plan?

My credit history is solid, but it’s on the shorter side since I moved to the US not too long ago. Would adding future babies as authorized users help kickstart their credit score?
I’ll be in tech for a while, not pulling in crazy amounts of money. Thinking of maxing out Roth 401k and IRA, building an emergency fund, and then diving into child savings accounts. Any other tips?

Thanks for sticking through this lengthy post, Money Minder.

Hello there! Congratulations on your new job offer and for taking proactive steps in planning for your future and your children’s future. It’s great to hear that you are prioritizing financial stability and aiming to provide a secure future for your family.

Regarding your questions about 529 Plans and Roth IRAs, it’s essential to approach them strategically and with a clear understanding of the rules and potential benefits. Yes, you can change the beneficiary of a 529 account, but keep in mind that there are certain limitations and timeframes for rollovers. Opening a 529 account for unborn children and changing the beneficiary later on is indeed a possibility, but ensure you adhere to the guidelines for rollovers to a Roth IRA.

In terms of credit-building for your children, adding them as authorized users on your credit cards can be a beneficial way to start their credit history early. Just make sure to monitor their credit usage and educate them on responsible financial habits.

Considering your career trajectory and tax bracket, focusing on maxing out your Roth 401k and IRA, building an emergency fund, and then moving on to funding future child accounts like 529 plans is a wise approach. Being in the tech industry gives you stability and growth potential, so utilizing tax-advantaged accounts like Roth IRAs can help you save efficiently for both retirement and your children’s education.

Additionally, as you plan for your family’s future, it’s important to reassess your financial goals periodically and make adjustments as needed. Keep educating yourself on investment options and seek professional financial advice if necessary.

All the best from THE MONEY MINDER on your financial journey ahead! Keep up the excellent work in securing a bright future for yourself and your loved ones.