Thanks for the useful exchange Mark! Your points are well taken.

In particular, I appreciate your pointing out the state income tax deduction for state residents investing in certain 529 plans. I'm based in a non-income tax state, so this isn't an issue for the folks I advise here. But of course you're correct that for those who are paying state income tax, this factor is well worth looking into.

My only caution here is that I think you overstate the point when you conclude, "if your employer does not offer a match but you live in one of the 32 states that provide a state income tax deduction for contributions to the state's 529 plan, you should invest in the 529 plan first." There are exceptions. The most obvious would be when a saver with a modest state savings tax liability might qualify for a sizable Saver's Tax Credit. That credit is eligible only for those who save in retirement accounts, not college savings accounts. For many savers, the benefit from the credit would dwarf the benefit from state income tax savings.

I'll follow up on a few of the other points you made in this reply.

-You are correct that taking distributions to pay for college from tax-deferred retirement accounts are subject to increasing one's AGI, and hence their financial aid eligibility. This is why I advise taking distributions from this purpose for Roth accounts instead, on which the tax has already been paid. Of course, if one doesn't need to tap the Roth or Traditional retirement accounts to pay for school, so much the better! But Roth withdrawals are more favorable for financial aid purposes than 529, Coverdell/Education IRA, or traditional IRA or 401(k) accounts.

-I think it's a bit misleading to suggest that reverse mortgages allow for "financing a retirement". Most obviously, they are financing one's home, not one's retirement. Thus they are only available to homeowners with equity, and they can be used for any purpose (including kid's college), not just retirement. Moreover, they often bring with them high fees and a set of other problems (which are worth exploring on another FiLife thread).

-I don't think we disagree on the advisability of index investing for long-term savings like retirement or college. But even the best 529 plans add a layer of fees on top of what the index funds would charge if they were held in a no-fee IRA. This is why when all else equal, a no-fee IRA or Roth IRA can provide higher returns than a 529. (I will say that 529 plans have improved their fees significantly in recent years. I especially like the Illinois "brightstart" 529 plan for those who don't benefit from a tax deduction by using their own state's plan).

Bottom line: we agree that saving for retirement AND for college is desirable. We also agree that having different savings vehicles from which to chose (IRAs, 401(k)s, 529s, Education IRAs, et cetera) is desirable. But nrek123's asked where one with NO savings and $500 a month should start. In that scenario, I stand by my suggestion to begin with retirement savings for the reasons I've mentioned.

Thanks again for engaging my answer here, Mark. I look forward to what Mike might add, as well as any follow-ups that you or nrek123 have.