Originally Posted by ohmathmom
I thought the 529s were made permanently tax-free in the Pension Protection Act of 2006. Of course, I'm not a lawyer or CPA so I could be wrong, and laws can change.

I never established a 529 because I had started a Roth IRA a few years before my DD was born. I make contributions to a pension plan and a 403(b), so the Roth IRA was a way to supplement my retirement rather than serve as my primary source of income. I felt that since I could use my contributions to the Roth to fund her education without leaving myself short in retirement, it wasn’t worth it for me to divert money away from retirement savings to save for her college. Of course, I only have one child, so the contribution caps on the Roth still allow me to have plenty set aside for her college with the benefit that the earnings and any contributions left over could be used by me in retirement.

People with more than one child will likely find a Roth alone won’t allow them to save enough because of contribution restrictions. Also, Roth IRAs have income restrictions, so not everyone is eligible to start one. They may also lack some additional tax benefits 529s allow for, so Roths aren’t a good alternative to 529s for everyone.
From FinAid
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With a Roth IRA, the portion of the distribution that comes from your contributions is tax-free, but the portion that comes from earnings is still subject to income tax if withdrawn before you reach age 59-1/2. (If you've reached age 59-1/2 and have held the Roth IRA for at least five years, the entire distribution is tax free.) If you limit your withdrawals from a Roth IRA to just the contributions, the entire withdrawal is tax-free.
The benefit of 529 plans at present is that investment gains (not just the principal, as with a Roth) are untaxed when used for college. The administration proposal to change the tax treatment of 529 plans is as follows:


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Specifically, the President’s plan will roll back expanded tax cuts for 529 education savings plans that were enacted in 2001 for new contributions, and – like Chairman Camp’s tax reform plan – repeal tax incentives going forward for the much smaller Coverdell education savings program.