When you pay qualified education expenses from a 529 account, your withdrawals are tax- and penalty-free. You can take a nonqualified withdrawal from a 529 account up to the amount of a scholarship; although you will pay taxes on the earnings, you won't pay the additional 10% penalty that's imposed on a nonqualified withdrawal.

Registered investment products (including mutual funds and ETFs) and collective investment trusts managed by Fidelity Management Trust Company (FMTC) are offered by Fidelity Distributors Company LLC (FDC LLC), a registered broker-dealer. Real-Time: Cash (Core) Account settlement position for trade activity and money movement, including core and other eligible additional Fidelity money markets. Eligible schools include any college, university, vocational school, or other postsecondary educational institution eligible to participate in a student aid program administered by the U.S. Department of Education. This balance includes both Core and other Fidelity Money Market funds held in the account. We will not respond to any individual feedback you provide in this. However, a 529 account can be "superfunded" with contributions of $75,000 per person or $150,000 per couple—which uses up your federal gift-tax exclusion for 5 years. See you at the top!

This site relies on JavaScript for critical functionality. The less time your money has to grow, the more challenging it will be to accumulate a significant amount of cash. If the timing is off, you risk owing tax because it's considered a nonqualified withdrawal. Cyber crime is increasingly a problem in the financial world, and taking steps to prevent activity in an account that you don't plan to use in the future is a prudent move.

May Lose Value. You can let the money sit in the account in anticipation of your child continuing on to graduate school or another post-secondary institution. Not only will that save you money, but it can also make these difficult times a little easier. Consult an attorney or tax professional regarding your specific situation. FIAM products and services may be presented by FDC LLC, a non-exclusive financial intermediary affiliated with FIAM and compensated for such services. Withdrawals from 529 plans are not taxed at the federal level—as long as you understand and follow all the rules for qualifying expenses. It can take several days for investments to be sold out of your 529 account and mailed to the school and then a week or so for the payment to make it through the mail and then processed by the school. While funds from a 529 account can be used to pay for expenses required for college, not all expenses qualify. Keep in mind that you must submit your request for the cash within the same calendar year—not the same academic year—as you make the payment. Previously, if you wanted to withdraw cash from your 401(k) or traditional IRA before age 59 and a half, you'd face income taxes and a 10% penalty on the amount you withdraw… You'll be happy to learn that there is a scholarship exception to the 10% penalty. No Bank Guarantee. This balance does not include deposits that have not cleared.

When she's not providing unsolicited financial and retirement advice to anyone who will listen, she enjoys reading, drawing and painting, and walking dogs at her local animal shelter. Because 529 plan assets are considered assets of the parent, they tend to have a small effect when the government calculates your financial aid eligibility, whereas accounts that are considered assets of the child, such as an UGMA or UTMA account, tend to have a greater effect on federal financial aid eligibility.


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