Don’t raid that college fund!

college funds
New survey finds many families have dipped into college funds for other purchases, and experts warn that could be even more costly down the road.

parents who’ve socked money away in 529 plans for their child’s college education have raided those accounts.

Four out of five parents who admitted to dipping into 529s also admitted to spending the money on something other than education.

When asked why, they claimed they thought it was either “use it or lose it” or didn’t know any better.

“In the survey, about 21% of people said that they don’t think there’s any penalties to tapping the funds early, which, sorry guys, but there are penalties there and you’re also going to owe some taxes on any earnings that are in the account,” explains CNBC’s Kelli Grant.

Those penalties and taxes could be levied at both the state and federal level.

The best way to avoid irs scrutiny is to leave the 529 money alone, even if unused, for college expenses down the road.

“There are some planners who say you can really hang onto it long range to think about eventually transferring that money to your child’s child, your grandchild, to help put them through school,” Grant says.

Read more:

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s