Mark A, one thing to add. This will address the statement you made: "The Roth only allows you to use contributions (tax and penalty free). All things being equal, you have more money available to use toward college with the 529 plan."
At the surface this seems to be true, but in my minds eye and math, it just isn't. Here's an example.
Assumptions:
1) 14 year old ... so 4 years till school.
2) You have $5000 to save in some kind of accounts.
3) Roth IRA limit is $5000.
4) Both account types have exactly the same return and fees (even though ROTHs will be cheaper fee wise and have more options), +10% per year.
Person A invests (all the money) in a 529 plan.
Person Z invests (all the money) in a Roth.
So the money for year one would be worth (((($5K * 1.1) * 1.1) * 1.1) * 1.1) = $7320 at the start of the 1st year of college. So the account has gone up $2320. If person A uses all the money for college, they get ... $7320 to use for college. If person B uses all the money for college they have to pay taxes on $2320. Well, depending on how much money they are making in their other jobs, they may not pay ANY taxes. And there is no penalty on earnings withdrawn for college.
NOW, look at the same situation a little differently. Person A didn't need all the money from the account to pay for school. Either because they had more then enough or they had other sources (scholarship, FA, etc). If they want access to the money, they may have to pay a 10% penalty and taxs (although the taxes should be minut because they are at the student rate).
So see, there really isn't much difference for withdrawls that qualify as college expenses. But the Roth account is extremely friendly to withdrawl from (you can take out what you've put in at any time for any reason without tax or penalty) and the earnings can have very little to no tax consequences if done correctly (for low income people such as students).
Make sense?
