What if 529s are Not What Wall St. Hypes Them to Be?
What if a 529 Plan's Earnings Were NOT Tax-Free as Claimed?
At left is a photo of the cover of IRS Publication 970, Tax Benefits for Education. This publication has been available for download from the IRS website for many years and it has been consistent in its description that earnings on 529 Plan withdrawals are NOT tax-free unless several criteria are met. Why didn't your 529 Plan salesperson, your 529 Plan state or your 529 Plan money manager mention this?
Here is the whole publication for your review. Flip to pages 56 and 57 for a description of how to calculate the taxes due - and penalties if you neglected to pay them - on your 529 Plan withdrawals.
And here's a better idea: Contact us since we are College Financial Planning Experts and not 529 Plan hucksters (we've never recommended one).
By the way, do 529 Plan money managers consider their management of your college savings to be a safe bet? Here's information about one manager's assessment of risk - New Jersey's NJBEST 529 - describing risk takes 16 pages (!) from their 130-page prospectus and details the FIFTY risks of investing in their 529 plan.
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