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Reply to "How old are your kids and how much do you have saved for each of them for college?"
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[quote=Anonymous][quote=Anonymous] Can anyone tell me why a 529 is better than investing in the market? I just think there's a high enough possibility my child will either get a scholarship or not go to college that it seems like a bad idea. [/quote] The earnings in a 529 are tax-free, which can result in significant savings over time. In some states, contributions to a 529 are tax-deductible which provides extra savings. If you use the funds for non-college expenses, you are taxed 10% on the EARNINGS - not the principal that you have invested. This earnings portion of a non-qualified distribution is also subject to tax as ordinary income at your tax rate. For many people, the tax savings on the earnings over time balances out or exceeds these penalties. If your child receives a scholarship, you can withdraw the amount of the scholarship for non-college expenses without incurring the penalty.[/quote]
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