529 Plans and SAs

Discussion in 'Military Academy - USMA' started by Shaka, Mar 26, 2019.

  1. Shaka

    Shaka Member

    Dec 20, 2018
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    Doing some research today on what we can do with the 529 plan for our DS and thought I would share this information with the forum. This is from www.savingforcollege.com

    "What happens if you've been saving with a 529 plan?
    While attending a service academy may be a tradition for some families, there are also parents who are surprised when their child expresses an interest in a military career. What happens if those families have been diligently saving for college with a 529 plan but now there is a good chance that they won’t need the money? There are actually a couple of options. First, if there is a younger sibling that is planning to attend college you can simply change the beneficiary of the account. If not, you can still withdraw the funds and avoid the 10% penalty tax, thanks to the Military Family Tax Relief Act of 2003 which provides that attendance at a U.S. military academy will be treated as a scholarship for purposes of non-qualified withdrawals from a 529 plan. However, like a scholarship, the earnings portion of the account will be taxable.

    Similar to an athletic scholarship, thousands apply to military academies but only a select number are accepted. While you may have your heart set on your child attending West Point, saving with a 529 plan in the meantime might be a safe bet."
    Jcleppe, AROTC-dad and USMAvol like this.
  2. parentalunit2

    parentalunit2 5-Year Member

    Apr 18, 2010
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    In addition to changing the beneficiary to a sibling, you can let it ride for grad school, or let it ride for a future grandchild.
    AROTC-dad likes this.
  3. VelveteenR

    VelveteenR Just gathering dust in the nursery... 5-Year Member

    Jul 24, 2014
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