Taking Distributions from College Savings – 529 Plans



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Stack of colorful hardback books, open book on blue backgroundWhen preparing for your child’s or grandchild’s college education, the importance of planning ahead and saving diligently is well known.  Less well-known are the guidelines and limitations surrounding how the funds can be used once your child is ready to begin their higher education.

A recent article by Rob Kron at BlackRock provides a great “how-to” guide to using the money you’ve saved in your 529 college savings plan. Rob discusses best practices such as keeping good records and avoiding distributions in excess of qualified expenses.  Helpfully, he outlines the various qualified education expenses such as tuition, room and board, and the cost of textbooks.

The author also highlights some of the pitfalls to avoid when distributing 529 savings.  Most important is to avoid distributions which exceed a student’s qualified expenses, as these can result in taxes and penalties.  It is also important to remember that the IRS requires that withdrawals from your 529 account be done in the same year as you incur the qualified expenses. So be sure to plan ahead on your distributions for fall and spring semesters and make sure to match the timing of the distributions and the expenses.

Horizon Advisors regularly assists our clients with setting up 529 college savings plans, choosing the best asset allocation, and helping with distributions when the time comes. Please contact us if you have questions and we would be happy to help.

_____________________________________________________________________________________________________Horizon Advisors is a Houston based fee-only wealth management firm. Horizon specializes in helping successful individuals and families understand, organize, and manage their often complex financial situations. Horizon offers integrated financial planning and investment management services.

Horizon Wealth Advisors
Horizon Wealth Advisors is a Houston-based, privately owned, fee-only financial advisor established in 1999. Our mission is to develop long-term relationships with thoughtful, successful individuals, families, and organizations by supporting and assisting them in achieving their financial goals.

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