Child not going to college? What you can do about your 529 plan 

Personal Finance


Because these funds are typically age-weighted, becoming less aggressive as the first day of college approaches, you’ll want to make sure the investment strategy of the plan matches the new person, said Lankford at Kiplinger’s.

For instance, if you switch the account from a 16-year-old child to a, say, 9-year-old child, “you may not need to get as conservative as quickly,” she said.

You can find rollover and beneficiary change forms on your 529 plan website. Typically they need to be downloaded and then mailed or faxed in, said Kantrowitz at SavingForCollege.com.

The new tax code also offers some additional backup options for 529 plans, Lankford said.

For one, parents can now use the accounts for K-12 private school expenses of up to $10,000 a year. “If it looks like they’re not going to be using it for college, and they’re in private school, you can still use it for that,” she said.

Should your child not be attending college because of a disability, the new code also permits people, without any penalty, to rollover up to $15,000 a year from a 529 plan to an ABLE account, a tax-advantaged savings account for disabled individuals.

If you simply need to take out the money for a non-education purpose, you’ll typically have to pay income taxes on your distribution along with a 10 percent tax penalty on the account’s earnings.

In some specific cases, you can take a non-qualifying distribution from your 529 plan without paying the 10 percent tax penalty. You still, of course, have to pay the income tax on your withdrawal, although that can often be calculated based on the beneficiary’s rate, which is often lower than the savers’. (SavingForCollege.com has a list of those exempted reasons, such as the death of the beneficiary).

But even if your reason for taking out the money results in you being dinged with a penalty, it’s not all that severe, Kantrowitz said.

“If you’re going to pay a 10 percent penalty on the earnings, it’s going to be anywhere from 1 percent to 3 percent of the total amount,” Kantrowitz said. “That’s negligible.”

More from Personal Finance:
Attending Harvard will cost $475,000 in 2036. Here’s how much other schools will charge
This account can help you slash your tuition bill — and few Americans know it
Tapping 529s to pay for private school could come back to bite you



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