Although many state 529 plans come with special tax advantages for residents of that state, you can open any state 529 plan you like. Be sure to compare investment options, fees and tax advantages when you choose your plan. Check out this Side-by-Side comparison tool which allows you to compare up to 5 plans.
You’ve got plenty of options in this situation. You can still use the money for many community colleges or vocational schools if your grandchild pursues that path. You can also change the named beneficiary to a different eligible family member who’s next in line for college. If you choose to withdraw yoru funds, you’ll pay a 10 percent penalty and federal income tax on just the earnings portion of your withdrawal. State taxes may vary.
The impact of a 529 plan on your grandchild’s financial aid eligibility is usually minimal. I suggest having a conversation with your tax or financial adviser and contacting the schools your grandchild is interested in when he or she is ready to go to college. Some careful planning can help prevent any major financial aid implications.
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