I maxed out my kids 529s and now there’s a good chance they aren’t even going to go to school – am I stuck?

It’s a fear that I’m sure many parents have: that their child has no desire to go to college. It’s especially true for parents who’ve been budgeting for educational expenses for decades through a 529 plan or something else. Indeed, things can get rather complex with a child’s 529 if there are no post-secondary classes in the cards. However, there are options and they’re worth exploring with the helping hand of a financial advisor or tax pro.

Let’s look at a specific case involving a Reddit user who maxed out their children’s 529 accounts but feels there’s a growing chance neither child will ever end up enrolling. It’s a rather unexpected situation for a parent who’s been saving up, to say the least. That said, such an individual isn’t “stuck” per se. However, there could be a few financial hits to the chin that may have to be taken depending on the path forward they choose.

In any case, there are more efficient uses of funds tied up in the 529s. And in this piece, we’ll explore just a few of them.

Transferring a 529 plan to another beneficiary is a smart move.

If one child doesn’t want to go to college or university, perhaps another one will at some point in the future. Even if all of one’s children aren’t going (this sounds like the case for this Reddit user), perhaps it’d make sense to use the 529 plan on oneself!

Indeed, you’re never too old to further your education, especially in an era where we’ll need to compete against artificial intelligence (AI). Reskilling, upskilling, and switching gears may be a must to adapt to the fourth industrial revolution (or the AI revolution). Even if the user also has no desire to return to school, I’d argue that keeping the 529 standing by makes a lot of sense.

Who knows? Perhaps the user’s children will change their mind and want to attend vocational school or something similar at some point down the road, perhaps after they’ve found out how challenging it can be to find a good job without a degree or diploma.

If you’re 100% certain that you or your children won’t end up going to school, perhaps it can be given to another family member (sibling) or held for the next few decades for eventual transferral to a grandchild. In any case, hanging onto the 529 is worth consideration for those who don’t need the cash and want to keep their options open.

Rolling over to a Roth IRA

The next best use of an unused 529 plan is to roll it into a Roth IRA. With a lifetime cap of $35,000 and other rules that apply, I view the move as a perfectly reasonable one to make to help give one’s child a nice financial headstart.

Who knows? If they’re not going to pursue post-secondary studies, perhaps they’ll need the cash for a startup endeavor or something of the sort. Indeed, a degree isn’t a necessity to do well, but it sure can make it easier to find work in an environment that could prove challenging as AI continues to disrupt the labor market.

As always, contact a financial planning pro and ask them about the SECURE 2.0 Act, which may allow eligible 529 plan holders to transfer funds to a more flexible Roth IRA. Personally, rolling into a Roth IRA is the best “Plan B” option for children who are for sure never going to step foot on that college campus.

Just withdrawing the funds.

Sometimes, it can make sense to take the penalty to pull out the funds. It’s the least optimal move, but one that may be necessary if the finances are tight and one just needs the liquidity. Of course, do consult a pro about the full impact of the penalties so you’re not surprised at their magnitude.

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