Many parents save for their child’s college education using a 529 account. But what happens if you “over-fund” the account and save too much?

If you are lucky enough to have this problem, you have three options:

1. Reassign: You can reassign the 529 account to a direct relative without any tax consequences. This includes nieces, nephews, cousins, aunts, uncles, or even yourself, for future education goals.
2. Withdraw It (and Pay the Penalty): If you withdraw the money for non-educational purposes, you’ll pay state and federal income tax on the gain, as well as a 10% penalty (+ a 2.5% if you live in California). Non-qualified distributions payable to the beneficiary (the child) are taxed at the beneficiary’s tax rate. Non-qualified distributions payable to the parent are taxed at the parent’s ordinary income rate.
3. Save It: By not withdrawing the money, you allow the investments to grow tax free. You can then withdraw the money in a lower-income year. Alternatively, the money can be left alone for the child’s graduate school or a future grandchild’s education costs.

The takeaway is that there isn’t a penalty for leaving extra money in a 529 plan after a student graduates.

The information, analysis, and opinions expressed herein are for general and educational purposes only. Nothing contained in this commentary is intended to constitute legal, tax, accounting, securities, or investment advice, nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type. The material has been gathered from sources believed to be reliable, however Think Different Financial Planning cannot guarantee the accuracy or completeness of such information, and certain information presented here may have been condensed or summarized from its original source. All opinions and views constitute our judgments as of the date of writing and are subject to change at any time without notice.

I hope you’re doing well and have exciting plans for this weekend’s 4th of July.

Please see this week’s personal finance articles, chart, and quote below, along with an article about a new investment option for clients of Think Different Financial Planning. These portfolios are designed for clients who want to invest in companies that have a positive impact across a range of environmental, social, and corporate governance issues.

3 Articles

Getting the Goalpost to Stop Moving
Morgan Housel, Collaborative Fund

One of the most important financial skills is getting the goalpost to stop moving. It’s also one of the hardest.

Speculation: A Game You Can’t Win
Lawrence Yeo, More to That

Told in a storyboard style, this article covers the issues with speculative investments.

How Much Do You Need to be Financially Independent
Nick Maggiulli, Of Dollars and Data 

1 Chart

Keeping with the theme of environmentally friendliness, it’s encouraging to see the decrease in price across energy sources.

1 Quote

“Money is numbers and numbers never end. If it takes money to be happy, your search for happiness will never end.”

– Bob Marley 

New Articles This Week

Disclosure: The information being provided is strictly as a courtesy/convenience. When you link to any of the web sites provided here, you are leaving this website. We make no representation as to the completeness or accuracy of information provided at these websites.

Think Different Financial Planning is not liable for any direct or indirect technical or system issues or any consequences arising out of your access to or your use of third-party technology, web sites, information and programs made available through this website.

When you access one of these web sites, you are leaving this web site and assume total responsibility and risk for use of the web sites you are visiting.

Think Different Financial Planning does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to Think Different Financial Planning’s web site or incorporated herein, and takes no responsibility thereof.

A growing number of investors want to know that their investment dollars are having a positive impact on the world.

A popular methodology for this type of impact investing is known as “ESG” investing, which stands for environmental, social, and governance.

• Environmental criteria consider how a company performs as a steward of nature.
• Social criteria examine how it manages relationships with employees, suppliers, customers, and the communities where it operates.
• Governance deals with a company’s leadership, executive pay, audits, internal controls, and shareholder rights.

Think Different Financial Planning is proud to announce that ESG portfolios are now available as an investment option. Click here to learn more about these portfolios. 

The information, analysis, and opinions expressed herein are for general and educational purposes only. Nothing contained in this commentary is intended to constitute legal, tax, accounting, securities, or investment advice, nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type. The material has been gathered from sources believed to be reliable, however Think Different Financial Planning cannot guarantee the accuracy or completeness of such information, and certain information presented here may have been condensed or summarized from its original source. All opinions and views constitute our judgments as of the date of writing and are subject to change at any time without notice.

Please see this week’s personal finance articles, chart, and quote below!

3 Articles

Best Places Lists
Robert Silvernail

There are a lot of factors to consider aside from taxes when you decide where you want to live during retirement.

No, Millennials Aren’t Poorer Than Previous Generations
Nick Maggiulli, Of Dollars & Data

On the misconception that millennials are poorer than previous generations.

What College Rankings Don’t Tell You
Tony Isola, A Teachable Moment

College rankings aren’t what they appear.

1 Chart

Inflation is rising in the United States and Europe.

Source: The Economist

1 Quote

“Being rich is having money; being wealthy is having time.”

– Henry Ward Beecher

Disclosure: The information being provided is strictly as a courtesy/convenience. When you link to any of the web sites provided here, you are leaving this website. We make no representation as to the completeness or accuracy of information provided at these websites.

Think Different Financial Planning is not liable for any direct or indirect technical or system issues or any consequences arising out of your access to or your use of third-party technology, web sites, information and programs made available through this website.

When you access one of these web sites, you are leaving this web site and assume total responsibility and risk for use of the web sites you are visiting.

Think Different Financial Planning does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to Think Different Financial Planning’s web site or incorporated herein, and takes no responsibility thereof.

Please see this week’s personal finance articles, chart, and quote below. I was also quoted in an article from Top Dollar, which is linked to at the bottom of this email.

3 Articles

California Defies Doom with #1 US Economy
Matthew Winkler, Bloomberg

Across a number of metrics, including household income, productivity, innovation investment, and GDP growth, California ranks number 1.

How to Choose the Right Kind of Mortgage
Peter Lazaroff

A home loan usually represents the largest liability on your balance sheet. That makes it important to understand the options you have.

Do it Yourself or Hire a Financial Pro?
Schwab

There’s never been a better time to take charge of your own finances. But, everyone has their limits.

1 Chart

The median price of existing homes is up 17% in the last year. The highest 1-year increase on record.

Source: 5-Chart Friday Charlie Bilello, Compound Advisors

1 Quote

“Ultimately, nothing should be more important to investors than the ability to sleep soundly at night.”

– Seth Klarman

Media Mentions this Week

Money Advice for Your 50s
Mikaela Sullivan, Top Dollar

I was honored to be quoted in this article. Here’s what I said:

“For many of us, our work is our life. Once people don’t have that, it can feel like you’ve lost your sense of identity and don’t have as much purpose. As funny as it might sound, you should plan what you’ll do when you’re not working.”

Disclosure: The information being provided is strictly as a courtesy/convenience. When you link to any of the web sites provided here, you are leaving this website. We make no representation as to the completeness or accuracy of information provided at these websites.

Think Different Financial Planning is not liable for any direct or indirect technical or system issues or any consequences arising out of your access to or your use of third-party technology, web sites, information and programs made available through this website.

When you access one of these web sites, you are leaving this web site and assume total responsibility and risk for use of the web sites you are visiting.

Think Different Financial Planning does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to Think Different Financial Planning’s web site or incorporated herein, and takes no responsibility thereof.