529 account — extra money
I have a child with a 529 account who didn’t go to college. Can I withdraw the money and just give it to him or do I have to use it for something education related like put it towards my daughters student loans that we are co-signed and are currently paying on? What happens in this situation with taxes?
Terry Says
Do NOT just take the money out! It will be taxable and subject to a penalty.
Instead there are two things you can/should do with the money.
1. You can use a 529 plan to pay for student loans for the designated beneficiary and their siblings, with a lifetime limit of up to $10,000 per individual
2. Your son, when he starts work, can transfer the money tax-free to a Roth IRA — up to $7000 per year (assuming he has at least that much income in the year, for a max of $35,000 over his lifetime.
The goal is not to pay taxes on that money. And these are two good solutions.
