Many parents spend years saving into a 529 plan with the expectation that their child will eventually attend college. But what happens if those plans change?
That was the question posed to Darren Zagarola, CFP®, CPA/PFS, in a recent NJMoneyHelp article. The reader’s son had decided not to go to college, leaving the family wondering what options were available for the money they had set aside.
In his response, Darren explains that 529 plans can be more flexible than many people realize. While they are commonly associated with traditional colleges and universities, funds may also be used for eligible trade schools, vocational schools, culinary schools, beauty schools, seminaries, sports academies, and other accredited educational institutions.
Darren also notes that the account owner may be able to change the beneficiary to another family member if the original beneficiary does not pursue higher education. He further discusses other permitted uses for 529 funds, including up to $10,000 for K-12 tuition, and explains that the account can remain invested for future educational needs if the money is not needed right away.
For families considering a non-qualified withdrawal, Darren reviews the potential tax consequences, including the taxes and 10% penalty that generally apply to the earnings portion of the withdrawal.
While every family’s situation is unique, Darren often encourages clients to fully understand their options before making decisions about education savings accounts.
You can read Darren’s complete response in the original NJMoneyHelp article: Our Kid Isn’t Going to College. What About Our 529 Plan?
More 529 Plan Resources
The advisors at EKS Associates publish new content throughout the month. To learn more about how to fund and use a 529 plan, visit the College Planning section of our blog.
If you’d like to learn more about Darren and how he helps families navigate education planning and other financial decisions, be sure to visit his advisor profile.
