Otherwise, the money could eventually go to another beneficiary down the road. You are typically allowed to withdraw unused money from a plan. Keep in mind, however, that you'll owe federal and state taxes on the funds, along with an additional 10 percent penalty on your account's earnings, according to the Securities and Exchange Commission SEC.
However, there may be special circumstances where penalties are waived on a withdrawal. For example, the SEC says if your child receives a scholarship, you may be able to withdraw plan funds without a penalty.
It's a good idea to discuss any potential tax or penalty implications with your plan's administrator prior to withdrawing funds so you know what to expect. Have questions about starting a plan or how you can use its funds? Talk to your tax or financial professional, or the administrator of your plan, for more information.
Retrieve a saved quote. Skip to main content Explore Allstate. Popular Searches. Allstate We help customers realize their hopes and dreams by providing the best products and services to protect them from life's uncertainties and prepare them for the future. Skip to main content Toggle navigation Log in. The government designed plans as a tax-advantaged way to encourage people to save for education.
That's why the most effective option is simply naming a new beneficiary. You can fund education for other beneficiaries or withdraw the money entirely. It's as simple as changing the name of the account's beneficiary to someone else in the beneficiary's family — one of your other children, or a first cousin, perhaps.
So, you might want to name a grandchild as the new beneficiary. You could even name yourself and use the funds for training, either in your current career or as a way to begin a new one. Related Questions Can I open a college savings account for a grandchild? Can you transfer funds from accounts? Can a child benefit from more than one account? Can I open a college savings account for a grandchild?
Find a local Merrill Financial Solutions Advisor. Open a account. Merrill, its affiliates, and financial advisors do not provide legal, tax, or accounting advice. Connect with us:. Asset allocation, diversification, and rebalancing do not ensure a profit or protect against loss in declining markets. I'd Like to. Copyright FactSet. All rights reserved. Footnote asterisk Other fees may apply. There are costs associated with owning ETFs. To learn more about Merrill pricing, visit our Pricing page.
Knowing this helps us better customize your experience. Sorry, child information is required. I am saving for Select one 1 child 2 children 3 children more than 3 children. I want to learn more about college savings.
I'm ready to open a plan. Password Show. Forgot your password? LOG IN. Enter your email address to begin the reset password process. Enter your e-mail address to begin the reset password process. What happens to my plan if I die or become incapacitated? Find your plan - Select your state below Did you know that residents are not limited to investing in their own state's plan? When the parent is the account holder, the effect on EFC is drastically reduced. Though a College Savings plan can be used for a variety of educational opportunities, and even disability expenses, it cannot be used to pay funds in the event of personal hardship unemployment, medical bills, financial hardship without penalty.
A common misconception about college savings plans is that the entire portion of the withdrawal is taxed. Because you make contributions with after-tax dollars, they are not taxed. The earnings portion of the account is taxable income, and the account holder is required to pay state and federal taxes on only the earnings portion of the withdrawal.
Unlike other educational savings accounts, the college savings plan does not expire or have a time limit. You can even save the funds for your grandchild. If you think that your child might decide to go to college, set a date three to five years in the future to discuss what to do with the account. The account could serve as an emergency fund to withdraw from as necessary down the road.
Before making a final choice about what to do with the account, take some time to process your options and talk to your tax professional. A covered educational institution's name or logo on the Edmit platform is not an endorsement by the covered educational institution of SoFi's student loan products.
Edmit may receive compensation from SoFi on a per-funded loan basis. SoFi does not guarantee the accuracy of information provided by Edmit, its affiliates or subsidiaries. Enrollment in Edmit does not guarantee eligibility for a SoFi loan product.
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Our Data. Learning Center Guides. Before High School. Make your plan on how best to save.
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