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.