The President is proposing a big change to 529 college savings plans—families could no longer withdraw the money tax-free (even if it’s used to pay for college expenses as the 529s are intended).
I’m not a financial advisor and it wouldn’t be a good idea for me to give broad recommendations on this blog about where families should or should not put their money.
So I’ll just share two reminders.
First, if enacted (which is not a slam dunk by any means), the proposed change would only apply to new contributions. Money already socked away in 529 plans could still be withdrawn tax-free.
Second, please don’t let fear or confusion about the right plan deter you from actually saving the money.
No matter where or how you do it, saving is the single best strategy to pay for college. The more money you have on hand, the less you’ll need to rely on financial aid and the more control you’ll have over your college financing.
I always advise that families focus their college planning efforts on those areas that you can control. You can’t ultimately control whether or not this change to 529 plans goes through. But you retain control over your commitment to saving.
Policy changes and other factors might later make you regret where and how you saved your college money. But you’ll avoid the worst financial regret—failing to save any money at all.