“We’ve been putting $12,000 into each of our two kids’ 529 accounts for a few years. The balance is now $90,000, and they have 7 to 9 years before college. I think we’re close to what we’ll need—should we start putting those contributions somewhere else?”
It’s a great question, especially for parents who’ve been diligent about education savings. If you’re approaching your college funding goals, here are the next steps to consider.
Are You Fully Funded?
If you have around $90,000 in a 529 plan now and 7–9 years until college, there’s a good chance your account will grow to around $150,000, assuming modest returns and a shift to lower-risk investments as college approaches. That may be enough to cover three or four years at many schools, especially with some additional cash flow during the college years.
If so, it makes sense to avoid overfunding. 529s offer limited tax benefits unless you live in a state with a deduction, and extra funds can be hard to repurpose without tax penalties.
What If You Do Overfund?
Fortunately, new Secure Act rules allow for limited rollovers from a 529 to a Roth IRA for the beneficiary—up to $7,000 per year (subject to earned income and other limits), with a $35,000 lifetime cap. The account must be at least 15 years old, but it’s a useful option if your kids don’t use all the funds.
Where to Save Next: UGMA Accounts
If you want to keep contributing $12,000 per child per year, a UGMA (Uniform Gifts to Minors Act) account could be a good next step. These accounts:
- Allow investments in the child’s name
- Are great for teaching kids about money and investing
- Automatically transfer to the child at the age of majority (usually 18)
That last point is critical—by age 18, your child would gain full control of the account. If you’re contributing over many years, that balance can grow significantly. You’ll need to decide whether you’re comfortable with your child receiving that amount outright.
How to Make It a Teaching Tool
If you choose the UGMA route, consider involving your child. Around ages 10 to 12 is a great time to:
- Show them how the account works
- Let them help choose index funds or ETFs
- Talk about long-term goals for the money
That early financial education is often worth as much as the money itself.
Final Thoughts
If you’ve been saving consistently in a 529 and are on track to cover college, it’s time to think beyond education. UGMA accounts can be a great next step—just be thoughtful about how much control your child will have and when.
Want more ideas for long-term planning?
Listen to the full podcast episode here.