From college fund to retirement nest egg – tax free
OPINION — When each of my children was born, I had their application for a 529 college fund filled out, mailed, and funded with the first $100 before they were released from the hospital. I dutifully funded those accounts monthly for years, until they accumulated enough to fund four years of college tuition at a South Dakota university.
What I didn’t count on were scholarships and different educational paths taken by my kids that left the 529 plans significantly overfunded. My options were to transfer the excess to a 529 plan for another family member or take the money out of the plan and pay income taxes and a 10 percent penalty on the growth.