I was speaking with clients the other day about setting up 529 accounts for their young children. They asked me a question I’ve heard many times before, and even asked myself…What if my kid doesn’t go to college? Is the money I saved lost? I explained to them that, thankfully, there are many different options of how to use the money, besides paying for college of course.
There are 4 main ways to use the money that I would like to share with you.
#1 Change your beneficiary. You can change your beneficiary to a different family member. Some plans let you do this as often as once a year!
#2 Use for other types of secondary education. While most people think about 529 accounts as college savings, they can be used for 2-year schools, trade schools and vocational training programs as well. This helps keep your (and your kids) options open.
#3 Remember what counts as a qualified expense. These plans can also be used to pay for books and supplies. Plus if your student is enrolled more than part-time, they can also be used for room and board.
#4 Take the cash. If none of the other options work, you can withdraw the cash. You will have to pay federal taxes on the money and a 10% penalty, but you do get your money. The exception is if your kid gets a scholarship, you only pay income tax on the amount you withdraw equal to the scholarship.
Here is a great article to learn more.
If you’re interested in finding money in your budget to save for a kid's college, let’s connect.