Started a 529, I know that it’s an educational account and tax advantaged. What happens if you don’t use it? If I utilize a transferee gi bill or VA disability benefits and they don’t utilize it. Is there anything besides the 10% penalty and paying income tax if I pull the growth out? I don’t want to have a 529 since I want to ensure they have the best education benefits they can and I wouldn’t want them to take loans or do what I did to get schooling paid for but I also don’t want to count on benefits I don’t have(disability educational benefits for my children) so I felt it’s better to have a 529 than not.
Posted by vicinadp
3 Comments
Just a few options…
You can pull money out equal to the amount of other financial aid/scholarship you receive without the 10% penalty.
You could always take the penalty and tax hit.
Some can be used to fund a Roth… with several restrictions.
You can change the beneficiary and use it for someone else, e.g., grandkids
Have you actually transferred the GI Bill? There are so many people I see posting about GI Bill benefits for them or their kids, but the GI Bill was never transferred, so it’s not even a relevant conversation.
If your retirement isn’t secured, don’t save for your kids education.
You can finance school. You can’t finance retirement.
You should be maxing TSP, IRA at a minimum before you are looking at 529 or other education plans.
I’m in a similar boat with the GI Bill. The 529 is a backup for my kids too, just in case the VA benefits don’t cover everything. If you don’t use it, the 10% penalty and taxes are the main downsides, but having that safety net feels worth it. You could always change the beneficiary or roll it over if you don’t end up needing it. Feels like a solid plan just in case.