Financial Tips Archive

Monthly Tip: Test Your 529 Plan Knowledge
(Updated: 09/14/2015)

  1. You can withdraw the 529 plan funds up to the amount of the scholarship without the extra 10-percent penalty, but you will still have to pay taxes on the earnings in the account.

  2. You can change the beneficiary of the 529 account to another family member if the plan has money left over.

  3. You can save the money in the 529 account for later when the child goes to graduate school.

  4. All of the above.

Answer: D

All of the above are true! You can save the extra money for additional schooling, change the beneficiary of the 529 plan to another relative, or withdraw the money from the account up to the amount of the scholarship without incurring the additional penalty. The penalty is waived if the nonqualified withdrawal results from the beneficiary receiving a scholarship.

This material has been provided for general informational purposes only and does not constitute either tax or legal advice. Although we go to great lengths to make sure our information is accurate and useful' we recommend you consult a tax preparer' professional tax advisor' or lawyer.

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