College bills are due soon. Which money should we use first?


Q. My son will start college in September. We have about $100,000 in a 529 plan and $25,000 in an UTMA. I also have a Roth IRA that I could take from. How do we decide which money to use first?
— Mom

A. Congratulations on the start of college for your son.

As with most financial questions, the answers will depend on your individual situation.

You can think of the three accounts you mentioned as “flexibility,” “pre-paid college expenses” and “retirement” accounts, said Nicholas Scheibner, a certified financial planner with Baron Financial Group in Fair Lawn.

The UTMA account provides the most amount of flexibility for spending, he said.

“However, if you sell any investments in that account with a profit, you may have a capital gains tax,” he said. “Also, UTMA accounts will potentially reduce the financial aid package more than a 529 plan would.”

Rather than using the UTMA account for tuition, it could be used to purchase a vehicle for your son if he may need one for school, Scheibner said. If your son is not receiving any financial aid, then he could decide to save that money for future expenses, such as a down payment on a home, he said.

The 529 plan is the “pre-paid college expenses” category and should be used for all qualifying education expenses, he said.

“Think of it as college expenses you have already prepaid. Use them for tuition, books, room and board, computers, and more,” he said. “Your goal with the 529 plan is to have a zero balance if your child still has education expenses.”

You do not want to have a large balance at the end of his education, with no plans for the future of the funds, he said. Any pro-rated withdrawals not used for college will incur a 10% penalty, he said.

Then there’s retirement — your Roth IRA account.

“You may need those funds yourself for retirement, and the Roth IRA provides tax-free flexible spending in retirement for you,” he said. “Also, the tax-free growth potential of the account is significant.”

Consider meeting with an advisor who can review your entire financial picture to help you make the best decision for you and your family.

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This story was originally published on July 5, 2022. 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.