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As parents, one of the most common questions we ask is: “Where should I be saving for my child?” The answer isn’t one-size-fits-all. It depends on your goals. Are you saving for college? Long-term independence? Flexibility for an unknown future? Or, for families raising a child with disabilities, are you also considering how savings may impact future eligibility for government benefits?
Understanding the differences between Roth IRAs, UTMAs, 529 plans, and ABLE accounts can help you make confident, informed decisions that align with your child’s future.
Roth IRA
A Roth IRA can be one of the most powerful long-term savings tools available but it comes with one key requirement: your child must have earned income. If your teenager works a summer job, babysits, lifeguards, or earns part-time income, they are eligible to contribute up to the lesser of their earned income or the annual IRS limit. A custodial Roth IRA allows you to manage the account until your child reaches adulthood. The real power of a Roth is time. Contributions grow tax-free, and qualified withdrawals in retirement are also tax-free. Contributions (though not earnings) can be withdrawn at any time without penalty, which provides flexibility. For children who are able to work, even part-time, this strategy can jumpstart long-term financial independence in an incredibly meaningful way.
UTMA (Uniform Transfers to Mirrors Act)
A UTMA (Uniform Transfers to Minors Act) account offers flexibility in a different way. These accounts allow you to invest money on behalf of your child, and the funds can be used for any purpose that benefits them, not just education. There are no contribution limits, and you can invest in a wide range of assets. However, it is important to understand that the assets legally belong to the child. Once they reach the age of majority (typically 18 or 21, depending on your state), they gain full control of the account. Additionally, UTMA assets are considered the child’s assets for financial aid purposes. For families who may rely on means-tested benefits like SSI or Medicaid in the future, this ownership structure can create complications. Because the funds are legally the child’s, they could impact eligibility for important benefits later in life. For that reason, careful planning is essential before choosing this route.
529 Plans
When education is part of the goal, 529 plans are often a foundational savings tool. These tax-advantaged accounts are specifically designed for education expenses. Contributions grow tax-free, and withdrawals are tax-free when used for qualified education costs. Funds can be used for college tuition, trade schools, certain K–12 expenses, and some apprenticeship programs. Many states also offer a state income tax deduction for contributions. For children with disabilities, 529 funds may also be used for specialized schools or post-secondary transition programs, provided they meet qualified expense guidelines. If your child ultimately receives a scholarship or chooses a different path, there are still options available, including transferring the funds to another family member or potentially rolling a portion into a Roth IRA, subject to current regulations. A 529 provides structure and tax efficiency for families who see education as part of their child’s journey.
ABLE Accounts
For families raising a child with disabilities, ABLE accounts are one of the most important planning tools available. Created under the Achieving a Better Life Experience Act, ABLE accounts allow individuals whose disability began before age 26 (increasing to age 46 starting in 2026) to save in a tax-advantaged way without jeopardizing certain government benefits. These accounts offer tax-free growth and tax-free withdrawals when used for qualified disability expenses, which include housing, education, transportation, healthcare, assistive technology, and personal support services. Up to $100,000 can be saved in an ABLE account without impacting SSI eligibility, and the funds are generally not counted as a resource for Medicaid, subject to certain limits. In many of the families I work with, ABLE accounts provide both flexibility and autonomy. They allow the individual with disabilities to manage funds for everyday life while preserving access to critical support programs.
Choosing the right account is not about picking the “best” option. It is about aligning the right tool with the right goal. If you are saving primarily for education, a 529 plan often makes sense. If your child has earned income, a Roth IRA can create long-term tax-free growth. If you want broad flexibility and are not concerned about future benefit eligibility, a UTMA may work. If your child has a qualifying disability and future government benefits are part of the picture, an ABLE account should absolutely be considered.
Often, the most effective strategy involves coordinating multiple accounts in a thoughtful way. As parents, especially parents of children with disabilities, we are not just saving money. We are building options. We are creating flexibility. We are protecting eligibility. Most importantly, we are laying the groundwork for dignity, independence, and opportunity.
The decisions you make today can dramatically impact your child’s financial future. Thoughtful planning now can reduce stress later and create a clear path forward for whatever the journey holds.
*This content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information and should not be considered a solicitation for the purchase or sale of any security.
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