Bailing on college? 529 plan options

Photo: seeman/

Q. I saved a lot in a 529 Plan for my daughter but she’s not going to college. Instead, she’s getting married to a military guy and moving out of the country. How can I access this money and what penalties will I have?
— Mom

A. You have several options if your daughter doesn’t go to college.

First, you can change the beneficiary to another qualifying family member who is planning to go to college, said Miriam Lopez, a certified financial planner with U.S. Financial Services in Fairfield.

Your other options are to hold the funds in the account in case your daughter decides to go to college at a later date or has a child that you can then name as a beneficiary, or you could make yourself the beneficiary and further your own education, Lopez said.

“If none of the above is an option, then the earnings portion of the amount in the account, not what you originally contributed, will be subject to income tax as ordinary income at your tax rate for the year in which is withdrawn,” she said. “In addition, the earnings portion will also incur a 10 percent penalty.”

If the full amount is not withdrawn at once, Lopez said, then each withdrawal from the 529 plan contains a pro-rata portion of earnings and principal.

You may also owe state taxes if you claimed a deduction or credit for your contributions. That’s not an issue for New Jersey, but is for New York and several other states.

Email your questions to .

This story was first published in May 2017. presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.