We took the distributions out of the 529 plan rather than waiting to hand down to his future children. Let DS pay the taxes on the small earnings (without the 10% penalty) and used the cash proceeds to start funding his Roth IRA. They earn upwards of 10,000 in taxable wages each year for their 4 years. With recognizable taxable wages, this allows funding the IRA and upon graduation he had a 20K retirement nest egg started.