One of the biggest fears families have about using a 529 plan to save for college is the dreaded 529 plan penalty.
There are many ways to save and pay for college, and the absolute best way to do it varies depending on your specific situation. A 529 plan, which is designed to help you with higher education expenses, is a type of tax-advantaged account that allows you to save and invest money.
As long as you withdraw that money for qualified expenses, you can do so without paying taxes on it. However, if you don’t use the funds in your 529 plan for qualified education expenses, you may be assessed a tax penalty.
Thankfully, it’s fairly straightforward to avoid this 529 plan penalty, as long as you take a few precautionary steps.