My Daughter Got a Full Ride Scholarship, What Do I Do With Her 529?
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- เผยแพร่เมื่อ 19 ต.ค. 2021
- My Daughter Got a Full Ride Scholarship, What Do I Do With Her 529?
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What Dave said at the end was essential. The caller should consider giving his daughter the cash for working so hard to get the scholarship
At least pay her car insurance or something. (If he's not doing that anyway)
@@wordsalad01 Very nice. She seems to be doing all the right moves and if you give her the money, she will spend it wisely. Congratulations
@@wordsalad01 very good parenting
@@wordsalad01 give me tips on how you raised your daughter
He said they would help so incidental etc...but the rest he needs to keep invested for the other four kids
I am a college professor. What many students don't understand is that the full ride is conditional upon the student being able to maintain a minimum GPA and number of hours per semester (usually around a 3.5 and 12 hours). Most students will lose those scholarships by the end of the second year, if not sooner, which is a win for the school because they must start paying tuition. Even dropping one class due to low grades can cause students to lose the scholarship. Don't cash that money out so soon, keep it handy in case she needs it later. Also, I would definitely give her a stipend for her hard work since you have the money anyway.
Get me a scholarship Donna I’m tired of this job
Unfortunately those are usually limited to high school students who are just entering college. @@wescald
Wow! I’ve got a 529 that I’m doing for my children and I can’t even imagine this happening! That would be the best news and I could then give this money to help my children buy their first house or something. 😁
Small correction: a scholarship withdrawal from a 529 is not subject to penalties, but is subject to income tax.
Correct!
Good looking out. By any chance do you know if it's taxable for the daughter or the parents? If the daughter that's good news unless she's ALSO working a lot as well. If the parents, ouch.
@@ffraine It depends. See the Form 1099-Q instructions.
The beneficiary of the account is listed as the distribution recipient if either (1) the distribution is paid directly to an educational institution, or (2) the distribution is paid directly to the listed beneficiary. Otherwise, the account owner (presumably the parent) is listed as the distribution recipient.
From there, if the distribution is "non-qualified" (meaning that the funds are not used to pay for qualifying educational expenses), the earnings portion is included in the gross income of the distribution recipient. It is also subject to the 10% penalty unless it is a non-qualified distribution made on account of death, disability, or a scholarship.
Interesting
Correct, Dave is wrong on this. It's not tax-free.
So the stupid kids get the money and the smart one doesn’t? Lol sounds like a good reward for her. I would give it to her as her down payment for her house after she graduates.
He still needs to save for the other four kids...then after they are all gone if he wants to be generous with dispersing to kids fine
@@TheDjcarter1966 He has 400K saved. He only needs 360K for his final 4 kids
They could all go to a community college and transfer to a state school so each of them only costs 25,000 and the rest they get for their house down payment when they graduate.
Same
@@MrBrewman95 CLEPs are also a great option. They’re multiple choice tests that cover most gen Ed’s, and are acceptable at just about every state school. So unless they play on going Ivy League, they could test out of their gen Ed’s at $20-$100 per test. Assuming you pay the full price, that’s $33 per college credit (3 credits per class)
Masters degree also full rides are GRADE DEPENDENT and a lot can happen! Do nothing!
Give it to that prince in Nigeria who has been emailing all of us!
I was "courted" by Prince William and Andrea Bocelli, in the comments... 🤣
"Andrea" wanted me to open up a bank acct in NYC, so he could "help" me. Right, rofl.
True story. Reported them to the FBI, emailed the ABF (Andrea Bocelli Foundation). They emailed me back with an apology for the perps. Nice people.
Twice recently, got a call from "Amazon". Someone charged over $700 to my acct. Called Amazon. Locked the acct.
Called the FBI. Ditto, just yesterday.
They're on my speed dial, lol.
So many people "the daughter earned it so give it to her not the siblings" - Who knows how she earned the scholarship.Did the dad spend every evening tutoring her or teaching her sport that he couldn't do with the other kids, so many variables. The benefit of it is that the 529 isnt needed for her and her siblings can benefit from it so that all the kids can start off with zero debt. The whole point of family is to help each other.
It pays to raise smart children
Keep it going, she may want to go to graduate school later on, or it can be used for other needs like a car, books, semester abroad, etc. Discuss how she envisions her academic future after she finishes her first year.
The end of the video is very important: assume you had 1 child and they got a full ride. You would need to file the award swap to withdraw the 529 funds so they don’t get locked in without a route/child to utilize them on.
Also, 529 funds you designate for your kids can also be used for education for yourself or your spouse. Never too old to keep learning!
@@AndrewMassengale Or simply allow them to grow and pay income tax on the gains. Essentially becomes a traditional IRA in theory; these funds wouldn’t be able to be utilized in a back door ROTH IRA for someone over the $140k income threshold could they?
@@WatchBurnGo No idea! I'm not well-versed in all the fancy maneuverings of retirement vehicles. What you said sounds right in theory. Hopefully someone more knowledgeable can step in with the right answer.
The guy is just overthinking this. Save the 529 funds for the other younger kids or future grandkids. Just keep it in the 529 plan invested like Dave said.
Keep it and invest it for her children! Money is always good being invested!
at least the amount you had planned to give her
Save some of that for the daughter's grad school. Grad school is expensive and it sounds like she's smart enough to go the extra mile after her bachelors is finished.
She should get some of if not all of the money that was allocated to her. Otherwise her fall raid benefits her personally in no way. Help her start life with a foot up.
That’s what you would do but not what this guy is doing. Pay attention .
My oldest is a senior in college (job waiting :) and has received multiple scholarships over 4 years, was not aware we could pull this amount out of the 529, tax & penalty free. Pays to listen to Dave $$
Penalty free but not tax free. See comments above. Dave goofed. If your oldest is listed as the beneficiary the tax will be less assuming they're not working since it goes on their taxes, but if it goes to you it's taxable income for you.
Ok Dave if you let him ask the question on this one we could have avoided the confusion.
100%!!!
Unreal! Goodness (slow down and actually listen) breathe
im glad i watched to the end, i didn't know you could take out 529 funds by pairing it with tuition costs that had been paid with scholarships.
Just to let you know caller, my middle son got a full ride, but Sophomore year he moved into a house, (lease of course) with friends. You may want to pump the breaks on what to do with the money until she knows what she's doing about housing Sophomore - Senior year. My son also attends a private college. I'm also not sure you factored in her getting to and from school, holidays and so on. It also cost the wife and I car rental storage and hotel for visits. Not only that, but covid hit and I had to make the unexpected trip to bring him home and store his belongings. Yes, do follow what Dave says, but have the money on hand for it's original plan. I'm not being judge mental at all, but it seems to me you have washed your hands and moved on to the next kids in line. So, forgive me if I sound judge mental, it's just what I thought I heard you saying. Great job to you and yours.
"brakes"
Keep it for retirement and eventually a legacy for her daughter anyway.
I paid for my own College. I would be so grateful if my Mom had a retirement. So looking at both sides of it. I would want my Mom to be set in her Golden years. Especially as responsible as this woman was.
That’s incorrect, to avoid taxes on a 529 plan you need to roll it over to another child to avoid the tax.
I would keep it invested in case she wants to get a masters degree. Or give it to her after she graduates.
If there’s any left he should put more in retirement.
She may want to go on for an advanced degree, too.
Dave is wrong on this. You can get rid of the 10% penalty but not the tax. Still have to pay the tax on the profits if you take it out with the scholarship rule.
You are correct. I had the same situation; 2 of my 3 kids earned full-rides (the third was no slouch, either!). There is no penalty in this instance.
information nuggets
Hey, I'm from Duluth!
It all depends how close the other kids are to finishing high school. Im so glad I put my oldest daughter’s college money in a money market type 529. I would be so heart broken had I invested it.
Hey guys! Could you guys give me a few good recommendations for 529 plans. I see so many options that my head is spinning. My child is 4 and I’m trying to get ahead after being 4 years late start.
the plan was to give her the money if she work for it but now she does not need ti. split it between the kids
She should definitely get some of the money. Maybe not all $30k per year, but how about half? She worked hard, did everything she was supposed to do, and then....you took the money away that was reserved for her. That's not exactly a "reward" for success. Give her half, you keep half, everyone is happy.
He didn’t take the money away, she got it from another source.
This family is crushing it. Good lessons for if I ever have a family in the tax free withdrawal.
I was hoping to not see a comment from you on this video.
Ignore the haters, ok?
⚘🙏❤🙏⚘
@@majoroldladyakamom6948 Better yet, ignore the spammers!
Hello King spammer
Not sure why Dave was confused in the beginning..i followed what he was saying 🤷
I didn't. What was he talking about with the $30k a year?
@@MichaelAnderson-wk1no not that hard. He planned on giving her $30,000 per year for tuition. If SHE HAD NOT received a full ride scholarship. That was their original plan. Now another source is funding her that 30 K a year for education. It doesn’t have to be her parents now, do you follow ?
There are alot of other expenses for kids in college it can be used for. I had left over $$ for my sons 529. I hope he goes back to school at some time later. He is only 22.
He should be proud of his daughter
I'm confused. If you withdrawal it for anything other than to pay tuition, it is taxed, correct? If the other 2 kids left at home are going to college, just leave it in the 529 to cover their schooling
Yeah, what Dave said is factually incorrect. A scholarship withdrawal from a 529 is exempt from the 10% penalty, but it is subject to income tax.
@@heathmcconnell3901 even when used for schooling? What's the point then?
@@insideoutsideupsidedown2218 If the 529 withdrawal is used to actually pay for eligible college expenses, then it is not subject to either the 10% penalty or to income tax on the earnings.
If the 529 withdrawal is used to pay for something else unrelated to schooling, but the withdrawal is also less than or equal to the amount of scholarships received, then it is not subject to the 10% penalty; but it is subject to income tax.
If the 529 withdrawal is used to pay for something else unrelated to schooling, if the student did not receive scholarships, and if none of the other exceptions apply, then the withdrawal is subject to both income tax and the 10% penalty.
My friend's daughter has a 529, but got a full ride from her Dad's military service that earned him a Post 911 GI Bill. So, can the parents take the cost of her tuition paid by the VA from the daughter's 529 with no penalty?
Wow, $400K in 529 for 3 kids? Sounds like they put a little bit much in there.
Take out the scholarship money, you can give her some if you'd like. The rest leave for the youngest, but can also save for grand kids. One thing you can do is "gift" college money to the grandkids, so your kids don't have to worry about it and that could potentially be a huge weight off of their shoulders (just as good as a home down payment).
I thought he said six kids. First has full scholarship, second the armed forces is paying and then he has a 14,13,12, and a slightly younger one. Busy times ahead.
All good ideas
I have money set aside for my kids' education that they will get when they graduate, not before. I told me kids that any scholarships would not affect what I give them. My daughter may get a free ride and she knows she will get a big check from me on graduation. Her work got her the scholarship, not mine.
My grandfather sold his estate and gave the money to me and my brother for our college fund. I graduated through a community college and I have quite a bit of money left over now. I plan on investing it so that I can contribute to my own kids college fund when the time comes.
I was told you can transfer the funds to siblings, cousins, etc. If one child doesn't use the funds he can use it for his other kids.
Remember You are also allowed to withdraw the monies you contributed tax/penalty free !!
Dave keeps missing the word “were”.
Why did he say “unexpectedly”? Parents are different lol
Can 529 accounts be moved from one beneficiary to another?
Yes
I would just keep it and give it to his grand kids.
WOW! The motivational music at the end of the video paired with the fact being said that you are REWARDED twice by having your kid get a scholarship, now you get to cash out equivalent amount from 529 tax free! LOVE IT!!!!! THANKS DAVE
Jesus Dave keep up. You spent the whole call figuring out what the guy was saying due to not listening.
Wish I could find my comment…. I thought he said he had six kids. Four still at school.
Did she put the money in her 529? If not, it’s not her money and she shouldn’t know about it.
But don’t you have to pay Taxes on the scholarship money ? It is technically income..
Not taxed if used for tuition
@@kenservey2103 Not entirely correct. My son owed taxes on his full-ride...
@@dking1362yes, scholarship money used for room and board is taxable.
Jesus Ramsey needs to listen to what they’re saying lol
Thats her house down payment with the compound interest added if she was my daughter
Then do that for your kids.
I would never tell kids I would pay for college. They would have to work hard and get scholarships. This would eliminate entitlement. I would cover the cost at graduation assuming grades are good or support them in other ways if they don’t go to school
Learn to communicate
Christopher, if you are listening. I just want you to know you did a great job with your kids…however, for the rest of us listening I speak on behalf of all Dave Ramsey listeners, it’s Friday, you had a chance to make our weekend early by trolling Dave. The way the call should have went is
Hi Dave I have 400k in a 529 account for my kid who we recently found out received a full scholarship and my wife and I are in disagreement on which Bitcoin company we will be distributing the untouched 400+k could you help us decide
Wait for Dave’s response….are you out of your flipping mind? Please tell me your kidding
Dont touch the money she might want to get a doctorate or a masters she might need the money then
Wait. You earned a full ride so we are going to give your share to your brother and sister? Wait what? Congrats on being awesome, sorry you don’t get this money. Do you know it takes a young person a long time to save $100,000 in retirement? Imagine the power of transferring her college money to her retirement and letting it grow through 5 years of college and first 9 years of her career. At 7% growth she could have $340,000 and have a great start on life. In fact I don’t know what people don’t do this regardless. They could pay off that low interesting school loan and still have the original $100,000 left over. Instead they give it all the the college and start life with nothing saved.
Pull her share and put the money into a stock account for her.
Or you could give her 30 a year like you promised her regardless… so she can pay for a new car maybe even a house and so she can live comfy during college… cus she earned the scholarship AND what you promised her for college
I don’t like the way he is looking at things. She is saving her parents 90K. It could cost them 360K for their final 4 kids to go to school. If they don’t get a full ride, they don’t deserve the 90K unless she gets it as well. I’m going to set up a mutual fund for my kids to use for either college or investing. If my kids decide not to go to college or they get a full ride, that’s still money I have set aside for them individually
I tell my kid please study well and I will pay 100% , and please study engineering but she likes criminology because of some tv shows
Criminology studies typically just lead to a career in being a detective.
Pair that with biology though, and you could MAYBE find something a bit better paying.
Should set her 90k aside/ invest it separately and give it to her when she's finished with school.
What a S*** deal work hard and well give you 30k a year for 3 years but don't work too hard or we won't give you anything....
Dave didn't listen to this guy, so ride when he does this. The caller had to repeat himself, with Dave talking over him. Dave should do better.
Dave is a little dense here. Market is gonna crash. Worse in history.
You willing to bet on that?
@@alinatamashevich3354 Let's Go Brandon!
@@miketheyunggod2534 I concur!
Another example of why socialism and wealth redistribution are morally wrong, please don't make the succesful kid bitter by taking money intended to her just because she earned money by her own merit.
Why in God's name let your son join the Military under Biden, General Milley etc? Talk him out of it, man. Serve your country in a different way.
This caller talks in a stream in consciousness with no real end point… basically like a woman
insulting.
Dave needs to learn how to listen, she paid her first year and then got the scholarship