529 funds. If I put 10k into a 529 and the kid turns out to be a "bum", (at age), can I stop or pull it out?

Answer 1

You can stop at any time. You can also change the recipient, so instead of your no good kid, maybe a neice or nephew or even yourself can use it.

However, if not spent on education, there's a substantial penalty of 10% Federally, maybe a state penalty, and then normal income taxes on the earnings that are pulled out.

This is the reason I have not opened one for my kid. I think a lot of people are going to be bit in the a$$ when their kids get to college age and choose not to go.

Also, you should make sure your retirement is full funded to your satisfaction first, before saving for your son. Sounds selfish doesn't it? Well, with college, there are scholarships and student loans out there your son may qualify for. There are none for your retirement. Your retirement is only what you save for it.

Another alternative is if you are fully saving for retirement maybe through a 401k plan, you can also put money into a Roth IRA, and use that as a savings vehicle for your son's education, because you can pull out the contributions at any time without penalty. The earnings need to stay in until age 59 1/2 or greater. If the bum doesn't go to school, that's just more feathers in your retirement nest.

Answer 2

You may use the funds for any post secondary school education. If the "bum" wants to be a chef or auto mechanic or hairdresser the funds may be used for those schools. You may even use the funds for yourself or your spouse. You may switch them and have a grandchild use them. If none of this works you may take the money out and pay taxes on the appreciation. Since you used after tax $s to fund the program there are no taxes on those $s. Only the growth is taxed at your then tax rate. Not too much risk, as I see it.

Answer 3

Kinda sick to work out how teenagers are transforming into up now. I keep in mind enjoying til way after the line lights got here on, chatting for a million hour an afternoon on my rotary telephone, if i needed my mom or dad, I had to place 1 / 4 in this gadget that I had to dial and desire mom or dad exchange into abode ... I getcha.

Answer 4

You can transfer the account to brother or sister if he/she turns out bad. Ask your investment advisor there are some other plans out there can help save for your child and have a higher return.