4 tax-effective ways to help pay for grandchildren’s college paid Impact_Partner
You’ll do anything for your grandchildren — from dealing with messy diapers to engaging in endless back-and-forth emoji chains as they get older. But if you plan to help them pay for college, it’s important not to drain your own retirement plans in the process. “It’s something I say again and again: You can never save too much for retirement,” says Diane Oakley, director emeritus at the National Institute on Retirement Security.
And while it’s possible to give to the 529 plan that a parent opens for their children, there are some advantages that come from being the owner of a 529 account. One is that the 529 plan can serve as your own financial safety net. “If a 529 plan is in your name, it’s possible to take back those funds at any time. While the money will be subject to tax and a 10% penalty on the earnings portion, the revocability can give you flexibility in case an emergency happens,” says Oakley.
Bottom line: There are many ways to save for your grandchildren’s college education, so it’s important to find the combination of strategies that maximizes aid to your grandchildrenmaximizes tax benefits for you. Remember: Your grandchildren can always take out education loans, but there are no loans to cover retirement, so prioritizing your own needs isn’t selfish — it’s smart. Speaking with a financial professional can help you assess the best avenue for your family.
Finally, it’s important to be on the same page with your children and grandchildren, letting them know both the scope of how you wish to contribute and potential limitations or concerns, so there’s no confusion.
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