7 myths and realities of 529 plans

Kathryn FlynnBy: Kathryn Flynn | 
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Although they’ve been around for years and continue to gain popularity, there are still many common misconceptions about 529 college savings plans. Here are our responses to 7 of the most popular myths:

Myth 1: If my child doesn't go to college, I lose all the money in my account.

Reality: You will never lose all of the money. Here are some options:

  • Use the funds to pay for community college, vocational school or other eligible post-secondary education.
  • Change the beneficiary to a sibling or other qualifying family member who will attend college.
  • Use the money to pay for your own continuing education.
  • Save the funds for a future grandchild.
  • Take a non-qualified withdrawal and pay income tax and a 10% penalty on the earnings portion of the withdrawal. Your contributions were made with after tax money and therefore will never be taxed or penalized.
Kathryn Flynn

Kathryn Flynn

Content Director
Kathryn is Content Director at Savingforcollege.com. She has been quoted in financial publications including the Wall Street Journal, the NY Times, Fortune, Money and GOBankingRates, and has been an expert guest on personal finance podcasts. Prior to Savingforcollege.com, Kathryn worked in product marketing at Henderson Global Investors (now Janus Henderson Investors), a global asset manager. She earned her MBA with Finance Concentration from DePaul University's Kellstadt Graduate School of Business, and has prior FINRA Series 7 and 63 licenses. Kathryn has 529 college savings plans for each of her three children, and enjoys creating content to help other families prepare for future higher education costs.