Looking for some advice here. I have a 529 account that’s ten years old with ~200k. Our kid is five years old. The original investment was 70k
Here are the two options I’m looking at do these make sense? I’m balancing hopes of the irs rules getting looser vs paying a smaller penalty now
A. Don’t touch the account. In four years when we reach the account maturity to do the tax free push to an IRA, move the max per year times three, one IRA for my kid, my wife and myself. With a conservative view of the market this will yield more than enough to send my kid to college. When college is over we’ll draw the account down (could be 100-300k in excess) hoping that the penalties aren’t as bad in the future, leaving 10-20k for my kids kids.
In this scenario if the 10% penalty stands I would pay a penalty of $10,000-$30,000
B. Take ~50k out today. Pay the 10% penalty then still do the IRA withdrawals leaving just enough for my kid to go to college with little cushion for excess to run over. The proceeds would go into our non 529 investment portfolio that we don’t plan on touching for 15-20years.
In this scenario I would pay a 5k penalty now.
original posted by d_zeen to r/personalfinance on Sun, 03 Mar 2024 15:49:32 GMT.