0 1 Free jhjhjh

Table of Contents

• The Expert Who Broke the 529 Rule
• Who Is David Blanchett?
• Why He’s Skipping 529s: His Four Core Reasons
• The Case for 529 Plans: What He’s Walking Away From
• 529 vs Taxable Brokerage: A Direct Comparison
• Other Alternatives to the 529
• New Rules That Have Made 529s More Flexible
• Should You Follow Blanchett’s Lead?
• Conclusion: A Decision That Only Makes Sense in Context
• Frequently Asked Questions
• External References and Further Reading

The Expert Who Broke the 529 Rule

Among the articles of financial planning faith passed down through generations of certified planners, few are as deeply embedded as this one: open a 529 college savings plan for your children as early as possible, contribute consistently, and let tax-deferred growth do the heavy lifting. By mid-2025, Americans had placed a record of roughly $500 billion in these accounts, trusting the system’s conventional wisdom.

Then came David Blanchett.

Blanchett is not a financial contrarian on social media. He is the head of retirement research at Prudential Financial, a CFP with a decades-long track record, and a researcher whose work on retirement income, sequence-of-return risk, and sustainable withdrawal rates is cited across the industry. When he told the Wall Street Journal that he and his wife have deliberately chosen not to open 529 plans for their four children — preferring instead to save in regular taxable brokerage accounts — it was not a headline designed to provoke. It was a carefully reasoned decision, grounded in his own financial circumstances, that raises genuinely important questions for every parent saving for a child’s future.

This blog post does not declare Blanchett right or wrong. It explains his reasoning, weighs it against the case for 529s, explores the alternatives he and other families are using, and gives you the framework to decide what makes sense for your family.

Who Is David Blanchett?

David Blanchett, 44, is the head of retirement research at PGIM, the asset management arm of Prudential Financial. He is one of the most widely cited retirement researchers in the financial planning profession, known particularly for his work on sustainable withdrawal rates, the true cost of retirement, and the behavioural dimensions of financial decision-making. He holds multiple advanced designations, including the Certified Financial Planner (CFP) credential.

His professional credentials matter here because they are precisely what makes his personal decision so noteworthy. As he acknowledged to ThinkAdvisor: “I’m a fan of some rules of thumb, but I think that 529 can be an incredibly powerful way to set money aside for college … because if you can do it for 10 or 15 years, you’re going to have this compounded growth that is effectively tax free.”

He is not dismissing 529s. He is explaining why, for his specific family, the constraints of the 529 structure made a taxable account the better fit. His twin brother Brian, by contrast, has put almost $700,000 into 529 plans for his three children. The same genetics, the same professional knowledge, and two entirely different strategies — each rational given the respective family’s circumstances.

Why He’s Skipping 529s: His Four Core Reasons

Reason 1: $400,000 in Student Debt Changed the Timeline

Blanchett and his wife Sarah had to pay off more than $400,000 in combined student debt from their graduate school years — his from a financial planning-adjacent degree, hers from veterinary school. By the time the debt was cleared and serious saving became possible, their oldest child was already approaching college age. The 529’s primary advantage — decades of tax-free compounding — was significantly compressed for that child. A 529 that has five or six years to grow is less compelling than one with 18.

As Blanchett explained to ThinkAdvisor: “Realistically, in the 529, maybe it would have had five or six or seven years for my oldest daughter before she started school, possibly a little longer.” When the time horizon is short, the tax advantage of the 529 is smaller, and the flexibility cost of locking money into an education-restricted account is proportionally more significant.

Reason 2: His Wife May Open a Veterinary Practice

Sarah Blanchett’s professional ambition to potentially start her own veterinary practice represents a significant competing financial goal. Opening a practice could require substantial capital for equipment, real estate, or a business loan at aggressive rates. Locking savings into a 529 — where non-education withdrawals trigger income tax plus a 10% federal penalty on earnings — would make that capital very expensive to access if the family needed it for the practice instead.

By keeping savings in a taxable brokerage account, the Blanchetts retain optionality. The money earmarked for college could, without penalty, pivot to funding a building purchase, a practice launch, or any other legitimate financial priority. This reflects a broader principle in Blanchett’s thinking: “The most important thing is saving money to accomplish financial goals … You can argue that college is a financial goal. You can argue that retirement is a huge financial goal. You can have other goals too.”

Reason 3: A Degree Is Not Guaranteed for His Children

Blanchett is not convinced that college is the optimal path for all four of his children. He told the Wall Street Journal that he and his wife are “actively saving money that we may use for college, but not necessarily.” In an era of rising tuition costs, crowded graduate job markets, and AI-driven disruption threatening the value of many traditional degrees, he is not alone in this uncertainty.

The 529’s penalty structure punishes precisely this kind of uncertainty. If a child chooses a trade, starts a business, receives a scholarship, or simply finds that college is not for them, the 529 holder faces a choice: force the money toward education anyway, transfer it to another family member, roll it into a Roth IRA (now possible, up to $35,000 lifetime), or pay taxes and a 10% penalty on earnings to get the money out. A taxable brokerage account imposes no such constraint.

Reason 4: Parents’ Financial Stability Comes First

Perhaps Blanchett’s most counter-cultural argument is his order of priorities. He believes that “the best thing we can do for our kids is to be very stable financially and have lots of emergency savings.” Before committing large sums to college savings, the Blanchetts wanted to ensure their own financial foundation was solid — sufficient emergency funds, retirement savings, and the capacity to fund Sarah’s potential business goals.

This philosophy conflicts with the conventional advice that parents should start 529 contributions as soon as a child is born. But Blanchett’s view has real financial logic: a financially stable parent who can help with tuition out of current income or accessible savings may serve their child’s long-term interests better than a financially stretched parent who maximised a 529 at the expense of their own financial security.

Blanchett in his own words: “What we’ve created with this taxable account is more optionality. We are really still saving for college. We’re setting aside a lot of money that could be used for college — but it might not be.” — ThinkAdvisor interview, April 2026

The Case for 529 Plans: What He’s Walking Away From

Blanchett himself acknowledges the power of 529s in the right circumstances. Understanding what he is walking away from is essential to evaluating whether his approach is right for your family.

Tax-Free Growth and Withdrawals

The 529’s defining advantage is that investments grow tax-free and qualified withdrawals are also tax-free. Unlike a taxable brokerage account, where capital gains and dividends are taxed annually or upon sale, the 529 keeps all growth inside the account working for you. Over a 15 to 18 year horizon for a newborn, this can result in a dramatically larger balance than the same contributions in a taxable account. This is why Blanchett calls it “incredibly powerful” for families who can start early.

State Tax Deductions

Over 30 states offer state income tax deductions or credits for 529 contributions, typically for contributions to the home state’s plan. In states with meaningful income tax rates, this adds an immediate, guaranteed return to early contributions that a taxable brokerage account simply cannot match. In New York, for example, families can deduct up to $10,000 from state income taxes annually. For high earners in high-tax states, this benefit alone can tilt the calculation firmly toward the 529.

Favourable Financial Aid Treatment

A parent-owned 529 is assessed at no more than 5.64% of its value in the FAFSA formula, compared to 20% for assets held directly in a student’s name. A grandparent-owned 529 is no longer reported on the FAFSA at all, following 2023 rule changes. Taxable brokerage accounts owned by parents are assessed at the same 5.64% rate, so the financial aid comparison between a 529 and a parental taxable account is actually fairly neutral — but custodial accounts (UGMA/UTMA) in a child’s name carry the heavier 20% assessment rate.

Superfunding and Estate Planning

High-net-worth families can “superfund” a 529 by contributing up to five years of annual gift tax exclusions at once ($19,000 per person in 2026, so up to $95,000 per parent per child, or $190,000 per child from a married couple), removing significant assets from a taxable estate while keeping them accessible for the child’s education. This estate planning benefit has no equivalent in a taxable brokerage account.

529 vs Taxable Brokerage: A Direct Comparison

Feature	529 Plan	Taxable Brokerage
Contribution tax deduction	State-level only (30+ states)	None
Growth tax treatment	Tax-free (no annual taxes)	Taxed annually (dividends/cap gains)
Qualified withdrawal tax	Tax-free	Capital gains tax applies
Non-education withdrawal	Income tax + 10% penalty on earnings	Capital gains tax only (no penalty)
Contribution limits	No annual federal limit; state maximum balances vary	No limits
Investment flexibility	Limited to plan’s fund menu	Unlimited (stocks, ETFs, funds, etc.)
Financial aid (parent-owned)	5.64% of value assessed	5.64% of value assessed
Unused funds	Can roll up to $35k lifetime to Roth IRA	No restriction; any use
Time horizon advantage	Stronger over 15–18+ years	Flexible at any horizon
Best for	Families confident in education path	Families with multiple competing goals

The key takeaway from this comparison is that the 529’s advantages are most powerful when the time horizon is long, college attendance is highly likely, and the family has already secured other financial priorities. When any of those conditions is uncertain, the taxable account’s flexibility becomes proportionally more valuable.

Other Alternatives to the 529

Blanchett chose a taxable brokerage account, but he is not the only parent exploring alternatives to the 529. Other approaches being used by families include:

Roth IRA

A Roth IRA is primarily a retirement account, but its contribution withdrawal rules make it a usable college savings vehicle. Contributions (not earnings) can be withdrawn at any time without tax or penalty. If the child attends college, the parents can use Roth contributions for tuition. If not, the money stays in the Roth growing tax-free for retirement. The critical limitation: annual Roth IRA contributions are capped at $7,000 per person in 2026, and you must have earned income to contribute. For parents who are not yet maximising their Roth IRA for retirement, using it for college savings creates a real trade-off.

Custodial Accounts (UGMA/UTMA)

Custodial accounts allow parents to invest in the child’s name, with the child gaining full control at 18 or 21 depending on the state. There is no contribution limit and no restriction on how funds are used. However, these accounts are assessed at 20% of their value in the FAFSA formula — significantly more than a parent-owned 529 or brokerage account — and once the child reaches majority, they can use the money for anything, including things the parent might not approve of.

Real Estate

Lauren Ziminsky, profiled alongside Blanchett in the Wall Street Journal article that sparked this discussion, took a different approach entirely. She invested $130,000 earmarked for her two children in a rental property, planning to use a cash-out refinance to fund tuition if needed, or to leave the asset for the children to use for something else if college is not the path. “I don’t know in 10 years what college is going to mean,” she said.

Trump Accounts (Section 530A)

A newer option is the Trump Account, created by the One Big Beautiful Bill Act (OBBBA) signed into law in July 2025. These accounts allow up to $5,000 per year in after-tax contributions, grow tax-deferred, and convert to a traditional IRA at age 18. Children born between 2025 and 2028 receive a $1,000 federal seed contribution. Unlike 529s, withdrawals from Trump Accounts are taxed as ordinary income and are generally prohibited before age 18. They are better suited as a long-term wealth-building vehicle than a targeted college savings tool, though they can complement a 529 strategy.

New Rules That Have Made 529s More Flexible

One reason Blanchett’s argument is somewhat less radical than it would have been a decade ago is that the 529 has genuinely become more flexible in recent years. The two most significant changes are worth understanding:

529-to-Roth IRA Rollovers (SECURE 2.0 Act, 2024)

Perhaps the most important change to the 529 in its history is the ability, introduced by the SECURE 2.0 Act and effective from 2024, to roll unused 529 funds into a Roth IRA for the beneficiary. The lifetime limit is $35,000 per beneficiary, the 529 must have been open for at least 15 years, and the annual rollover amount is capped at the Roth IRA contribution limit for the year (net of any other Roth contributions). While $35,000 is not a transformative amount, it does substantially reduce the “overfunding risk” that was previously one of the strongest arguments against 529 contributions.

Expanded Qualified Expenses

The definition of qualified education expenses for 529 withdrawals has expanded significantly. Funds can now be used for K-12 tuition (up to $20,000 per year per child, up from $10,000, effective 2026 under the OBBBA), registered apprenticeship programs, and up to $10,000 in student loan repayment. The OBBBA also expanded eligible postsecondary programmes. This broader scope reduces, though does not eliminate, the risk that 529 funds become “stranded” if a child’s education path does not follow the traditional four-year college route.

Key development: Starting in 2026, the K-12 qualified withdrawal limit for 529 plans doubles from $10,000 to $20,000 per year per child under the One Big Beautiful Bill Act, and qualified K-12 expenses now include books, tutoring, and test fees, not just tuition.

8. Should You Follow Blanchett’s Lead?

The short answer is: it depends, and Blanchett himself would tell you the same thing. His approach is not a universal prescription. It is a personal decision that makes sense given a very specific set of circumstances — circumstances that do not apply to most families.
Blanchett’s approach is likely to make sense for families who:

• Are starting to save for college relatively late and have only a short compounding window before the child’s college years.
• Have significant competing financial goals (a business, real estate, or other major capital need) that would benefit from the flexibility of an unrestricted account.
• Are genuinely uncertain whether their children will attend a traditional four-year college.
• Have not yet secured a robust emergency fund and are prioritising financial stability first.

Conversely, the 529 is likely the better primary vehicle for families who:

• Are starting early, ideally at birth or within the first few years of a child’s life, giving the account 15 to 18 years of tax-free compounding.
• Live in a state that offers meaningful state income tax deductions or credits for 529 contributions.
• Are confident that their children will pursue some form of post-secondary education, whether a four-year degree, trade school, apprenticeship, or other qualifying programme.
• Have already maximised other savings priorities (retirement, emergency fund) and are looking specifically for a college savings vehicle.

Many financial planners advocate a blended approach: funding 50 to 75 percent of the expected education cost in a 529 for the tax advantage, with the remaining balance in a taxable brokerage account or Roth IRA for flexibility. This allows families to capture the tax-free growth benefit without being fully exposed to the 529’s restrictions.

Conclusion

David Blanchett’s decision to skip 529s for his four children is not evidence that 529s are bad. It is evidence that the right financial decision is always contextual. A tool that is “incredibly powerful” in one family’s hands can be the wrong fit in another’s, not because the tool has changed but because the circumstances around it have.

For Blanchett, the $400,000 in student debt that delayed his savings start, the potential business ambition of his wife, his uncertainty about the college path for his children, and his commitment to financial stability before earmarked savings all point toward a taxable account’s flexibility as the more valuable feature. For many other families — those who start early, live in states with strong tax benefits, and feel reasonably confident about the college route — the 529 remains one of the most tax-efficient savings vehicles in the American financial system.

The question to ask is not “what does the expert do?” but “what does the expert’s reasoning reveal about my own situation?” Blanchett’s framework — prioritise flexibility when goals are uncertain, prioritise tax efficiency when they are clear — is universally useful, even when the conclusion it leads to is different for different families.

The best college savings strategy, as with most financial decisions, is the one built around your actual life — not someone else’s.

Frequently Asked Questions

Who is David Blanchett and why does his opinion matter?

David Blanchett is the head of retirement research at PGIM (Prudential Financial’s asset management arm) and a widely respected Certified Financial Planner. His opinion on 529 plans carries weight precisely because he is a professional who understands their mechanics well — and is still choosing not to use them for his own children.

What is a 529 plan and how does it work?

A 529 plan is a state-sponsored, tax-advantaged savings account designed for education expenses. Contributions are made with after-tax dollars, investments grow tax-free, and qualified withdrawals (for tuition, fees, room and board, books, and more) are also tax-free. Non-qualified withdrawals trigger income tax plus a 10% federal penalty on earnings.

Why is Blanchett using a taxable brokerage account instead of a 529?

His four main reasons: (1) he and his wife spent years paying off $400,000 in student debt, leaving a short compounding window; (2) his wife may open a veterinary practice, requiring flexible access to capital; (3) he is uncertain whether his children will attend college; and (4) he prioritises his family’s financial stability and emergency reserves above earmarked savings.

What is the penalty for non-educational 529 withdrawals?

If you withdraw 529 funds for a purpose that is not a qualified education expense, you must pay ordinary income tax on the earnings portion of the withdrawal, plus a 10% federal penalty on those earnings. Your original contributions (the principal) come out without tax or penalty since they were contributed with after-tax dollars.

Can unused 529 funds be rolled into a Roth IRA?

Yes. Since 2024, under the SECURE 2.0 Act, unused 529 funds can be rolled into a Roth IRA for the beneficiary, up to a lifetime limit of $35,000. The 529 must have been open for at least 15 years, and the annual rollover is capped by the Roth IRA contribution limit for the year. This significantly reduces the risk of overfunding a 529.

How have 529 rules changed recently?

Several improvements have expanded 529 flexibility. The SECURE 2.0 Act (2024) added the Roth IRA rollover option. The One Big Beautiful Bill Act (2025) doubled the K-12 qualified withdrawal limit to $20,000 per year per child (effective 2026) and expanded eligible expenses to include books, tutoring, and test fees. Eligible post-secondary programmes have also been broadened.

Is the taxable brokerage account approach right for most families?

Not necessarily. The taxable brokerage account is the better fit when families have short time horizons, multiple competing financial goals, or high uncertainty about college attendance. For families who start early, live in states with tax deductions for 529 contributions, and are confident in the college path, the 529 typically delivers better long-term after-tax returns.

What is the blended approach recommended by some financial planners?

Some advisers recommend funding 50 to 75 percent of the expected education cost into a 529 to capture tax-free growth, with the remaining balance in a taxable brokerage account for flexibility. This captures much of the 529’s tax advantage while preserving some optionality for non-education uses.

How do Trump Accounts compare to 529 plans?

Trump Accounts (Section 530A, created by the OBBBA in 2025) grow tax-deferred and can be used for education, home purchase, or retirement after age 18. However, withdrawals are taxed as ordinary income — not tax-free like a 529. They are better suited as long-term wealth-building vehicles than pure college savings tools. For education-focused savings, 529s still generally offer better tax treatment at the point of withdrawal.

Should parents save for college or retirement first?

Most financial professionals — including Blanchett — recommend securing retirement savings and an adequate emergency fund before maximising college savings. The reason: you can borrow for college, but you cannot borrow for retirement. A financially stable parent is also better positioned to help with tuition costs directly. Once retirement is on track, adding college savings through a 529, Roth IRA, or taxable account makes strong sense.