The answer depends on the specific plan rules. Age-based portfolios are popular choices in 529s and are designed to reduce risk as you get closer to the time you expect your child to go to college; this lowers the chance that a stock market swoon will take a big bite of your savings just as you need cash for the bills. We discussed some of those above. 529 plans are a great way to save for college, but what happens if you dont use all the money? They could use the 529 investment account to fund a new degree program. If your child is permanently disabled (or dies). All of Kiplingers 529 Plans content can be found here. Enter your e-mail address and password to login. There are two key ages: the age of majority (often 18) and the age of termination on the account (usually 21), says John Woerth, of Vanguard. You can start a 529 plan for your child or grandchild as soon as you as you receive the Social Security number. For example, CollegeInvest in Colorado (opens in new tab) matches up to $500 in contributions a year for five years for accounts with beneficiaries who are 8 years old or younger when parents enroll and when parents meet financial limits. But fewer than one in five children under 18 have 529 plans. However, you need to be careful how you use the money. If the beneficiary decides to go to a different school, the fund may not pay the full cost of tuition. (Note that different states may have different restrictions.). As the new account holder, it is their money to do as they please. Perhaps your child decided that higher education is a worthwhile endeavor, especially if they are not the ones paying the college tuition. There wont be much time left to take advantage of federal tax benefits, but parents may still be able to claim a state tax income tax benefit. Trying . Can I Withdraw Contributions from a 529 Plan Without Penalty? Transferring to a retirement account or trying to use it to buy your first house would be a non-qualified withdrawal and will still wind up with you paying penalties. You have been successfully subscribed to our email list. So, does that mean a 529 account is no longer a good idea? So, when deciding where to invest your 529 money, you might first consider your own state and look into incentives your states plan offers for its residents. But the states do. Most 529 savings plans will offer an age-based solution in which you can just pick a year, or date range, when you expect your child to go to college, and the portfolio will be rebalanced from stocks (more aggressive but riskier) to bonds (lower return, but more stable) during that time. Coverdell Education Savings Accounts can provide more flexible investing options compared to 529 college savings plans. This flexibility gives you a lot of options. The plans beneficiary is the one who decides how the money is spent, and the parents can help the child make decisions about the plan. A total of 15 states now offer matching contributions, seed money or other financial incentives (opens in new tab) for residents who invest in their plans. Published 8 April 20. Are you looking for a midlife career change? If you dont want to use the money for college, you can always withdraw it and use it for another purpose.
