Here’s how to prepare for fall withdrawals

School is out, grills are fired up, and family vacations are in full swing — it’s officially summer!

But even as you shop for hot dogs and sunscreen, you will likely notice that school supplies are already creeping back into stores.

As parents, it feels like we never really get a break from thinking about our children’s education. I love a good deal on pencils and notebooks for my high schooler, but I am usually not ready to think about returning to the classroom in the fall until at least August.

If you have a college-age student, however, summer is the perfect time to start preparing for qualified withdrawals from your my529 plan. Whether you have a child heading off to college or are planning to use the funds for other qualified education expenses, it’s helpful to have a plan in place now for making back-to-school withdrawals.

Here are five steps to prepare for fall withdrawals from your my529 plan:

1. Review your needs: Before making any withdrawals, review how much you have saved and how much you will have to withdraw. This will help you avoid taking out more than you might use.

2. Understand what qualifies as an education expense: It’s important to learn what qualifies before making any withdrawals. Please review the list of qualified education expenses here or in the Program Description.

3. Plan:  How soon you get your money depends on the method you choose for withdrawing funds. A check could take up to two weeks to arrive. Electronic fund transfers typically take two-three business days to arrive, but you will need to link your bank or credit union to your my529 account prior to the transfer. You also can send funds directly to the school using our electronic payment service, which has a $3.50 service fee.

4. Keep track of expenses: Be sure to keep track of all your qualified education expenses. This will help you stay organized and ensure that you can show the IRS how you used your funds should you face a tax audit.

5. Consider tax implications: When making withdrawals from your 529 plan, it’s important to know the rules on how 529 funds are taxed. While contributions to a 529 plan are made with after-tax dollars, withdrawals are tax-free if they are used for qualified education expenses. If the funds are used for nonqualified expenses, you will be subject to federal income tax and an additional 10% tax on earnings unless an exception applies, and you may be subject to recapture of state tax deductions and income taxes.

Preparing for withdrawals from your my529 account doesn’t have to be stressful. By reviewing your account balance, knowing the rules, planning and keeping track of expenses, you can ensure a smooth and successful my529 withdrawal process. And remember, if you have any questions or need assistance, don’t hesitate to reach out to my529 for help.

Now, go enjoy the rest of your summer!