Using Your 529 Savings

People who plan successfully for their children’s educations will often have a nice amount of funds available in their 529 plans. When the time comes, however, these same people are often quite confused about how best to access and use these funds. Fortunately, it’s not all that difficult, at least if you know a few basic tips and rules related to using the 529.  

Where to Withdraw

First things first, you may be wondering, if you have multiple 529 plans, which one you should withdraw from first. Really, even though people stress a lot over where to withdraw the money, it really doesn’t matter all that much, as long as all of the funds will ultimately be used for college.

With that said, though, you may want to withdraw from the accounts with the greatest earnings. The reason for this is that those earnings won’t be taxed providing you use them for college related costs. From there, you can choose to use the other accounts only as needed, and you typically won’t have as many earnings to report on your tax return.

When You’ve Withdrawn Too Much…

Another common concern people often have with their 529 plans is if they accidentally withdraw more than the qualified educational expenses they pay. Try not to let this happen to you because you’ll end up paying taxes plus penalties on the excess you’ve withdrawn.

You also can’t put the money back into the plan if you make this dire mistake. If it’s too late and you’ve already made this “goof,” there is SOMETHING you can do though. Just choose to use the excess on other qualified expenses before the year is up. 

As you can see, there are plenty of questions and concerns that people have surrounding their 529 plans. If you run into any others, remember you can (and should!) always ask a qualified financial adviser or accountant for advice.