I'm a novice investor, and may not have my facts 100% correct, but I just
went through that decision, and FWIW, here are my highlights.... (I'm sure
someone will correct any errors) Note that I don't have a State tax, so I
don't know the effect there.

Both:
--Contributions are after tax (like Roth)
--The distributions are tax free (like Roth)

529 Plan:
-- No contribution limits
-- Narrower investment choices.
-- Can't begin distributions for high school expenses (only college).
-- Assets belong to parent, 7 times less likely to effect students chances
for financial aid/grants.
-- This plan will expire in 2010 unless it's extended/renewed/whatever.
What does that mean? I don't know.

Coverdell:
-- $2000 contribution limit per year (per kid)
-- Wider investment choices.
-- Can begin distributions to pay for qualified high school expenses
-- Assets belong to beneficiary, this may hurt the students chance of
qualifying for grants and loans (by a factor of 7x)


I think that either route is a good choice, we chose the Coverdell. The
$2000 limit is okay, because we are fully funding our retirements and only
partially funding college for junior#1 and junior#2 with surplus $. Over
the long run, the Coverdell works out to be cheaper at our particular online
discount broker because of a lack of the three major fees, and an extremely
low cost ratio somewhere around 0.2%, resulting in much better projected
earnings (everything else constant).

If we decide that we want to save more than 2000/kid for college, we can
always open 529 accounts in addition to Coverdells.

What happens if junior #1 or #2 doesn't go to college? I don't know. Can I
roll the $ on to grandjuniors? Withdrawal with a 10% penalty? I'm not too
concerned because I have high hopes that my kids will want to use this $,
not to mention that I'm not planning on these investments reaching
astronomical values in the next 15-18 years.


"kwokwokwoo" <kwokwokwoo[at]walla.com> wrote in message
news:4b327474b621e5488fb1c2dea9659b02[at]localhost.talkaboutinvestments.com...
- quote -

What are the pros and cons about this college savings plan? Or am I better
off just stick with educational IRA?

Any comments will be greatly appreciated.