Here’s how to help your clients prepare for fall withdrawals
As families send their kids back to school, there are many ways to help your clients transition their students back to the classroom.
While some may be sending children off to kindergarten, many are launching their kids into their first year of college. If your clients have a college-age student with a my529 account, now is the time to start preparing for qualified withdrawals.
It’s helpful to have a plan in place now for making back-to-school withdrawals. Here are five key ways to help prepare your clients for fall withdrawals from their my529 account:
1. Review their funding needs and withdrawal plan: Work with your client to assess how much has been saved and what their projected expenses will be for the coming semester. Help them avoid taking out more than necessary.
2. Clarify what qualifies as a qualified education expense: Educate your clients on what qualifies — and what doesn’t — before making any withdrawals. Please review the list of qualified education expenses here or in the Program Description.
3. Guide the withdrawal method and timing: Advise clients on the different distribution methods — how quickly they receive the funds depends on the withdrawal method they choose. A check could take up to two weeks to arrive. Electronic fund transfers typically take two to three business days to arrive. Your clients can authorize you to make electronic withdrawals from a my529 account on their behalf by completing Form 760. Your client may also send funds directly to participating schools using our electronic payment service, which has a $3.50 service fee.
4. Encourage tracking of expenses: Stress the importance of keeping track of all qualified education expenses. These records will support tax reporting and ensure that they can show the IRS how the funds were used in the case of a tax audit.
5. Advise on tax implications: When making withdrawals, it’s important to know the rules on how 529 funds are taxed. Remind clients that 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, any earnings will be subject to federal income tax, any applicable state income tax, and an additional 10% penalty tax on those earnings unless an exception applies, and the withdrawal may also be subject to recapture of state tax benefits received.
Preparing for my529 account withdrawals doesn’t have to be stressful. Helping clients navigate withdrawals is more than processing requests; it is a chance for advisors to demonstrate ongoing value and support the education journey of their client’s family. As always, 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!
From the FAN — Summer 2025
