Real Answers for Life’s Money Challenges
My stepdaughter just started middle school.
Weve always put off sitting down and making a specific plan.
But it feels like time to get serious now.
The kids shaving her legs, for Gods sake.
Were very lucky to have the budgeting end of things down.
Barring financial emergencies, we should be able to save enough to cover most projected tuition costs.
What my wife and I cant figure out is where to put those savings.
Weve considered a 529 savings plan.
But the tax on withdrawals not related to education makes me nervous.
After all, there is so much uncertainty ahead.
My stepdaughter does very well in school.
What if scholarships take care of most or all of her tuition?
What if she decides to stay close to home and we dont need as much money as we projected?
Is there a smarter way to save for college if you dont know how much youll need?
Is there an advantage to 529 plans that Im missing?
-Frank
Dear Frank,
We laugh about saving for college when kids are very small.
Theyre little bundles of joy who simply need to be fed and clothed.
Why fret about whats going to happen 18 years from now?
And then, all of a sudden, theyre not small anymore.
They grow like very opinionated weeds and have their own senses of humor and points of view.
This very far-off life event is not actually that far off.
The good news is that youre saving.
A 529 savings plan is a solid option because its a tax-free investment account.
But the penalty is steep for those non-educational withdrawals: a 10% penalty on top of income tax.
Another option is acustodial account.
No Interest Til Almost 2027?
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Did you know?
Probably not as good as youd like.
It always seems like an uphill battle to build (and keep) a decent amount in savings.
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