23 Apr 2026 Withdrawals That Count

Last week Geoff wrote about the deposits that really matter into all the accounts we manage, including time, energy, social, and memory accounts – plus the obvious financial accounts. If you missed his post, I highly recommend going back to it and sitting with his question at the very end.

After reading his brief, I considered how after making deposits to all our various types of accounts, the time comes to spend from those accounts. And especially when spending long-term financial accounts, there often is a mental adjustment period to switch from depositing (or just letting accounts grow) to withdrawing from an account. We spend years saving to retirement accounts, education accounts, health savings accounts – then suddenly start spending which can generate new anxieties ranging from having sufficient funds for your needs and wants, to analyzing portfolio allocation, tax impact, etc. Navigating those decisions and corresponding feelings is often where we can provide valuable assistance.

Spending from an education account is a little easier to do than spending from a retirement account because there is a finite time associated with the expense. Sometimes grad school extends the spending years, but overall education expenses occur over a relatively short time frame compared to retirement. With college acceptance final deadlines fast approaching, questions about 529s are increasing, so I thought I would focus today’s brief on withdrawals for education.

Some of the questions we receive are market focused. Perhaps you worry about security of funds in the financial markets or question the market for college itself – will this college will give a return on my investment? Then there are practical questions about how to actually withdraw funds and spend them. Can you pay for college on a credit card? Can funds go directly to the Bursar’s office? And what expenses actually count as qualified expenses from a 529 account? We are here to help you with these practical questions, and to direct you to the right resources, so you can focus on equipping your student with all the other aspects of transitioning to college.

First, WHY to use 529s

• Investments grow tax-deferred, and qualified withdrawals are tax-free. 
• No income limits for contribution eligibility (like a Coverdell ESA), and high contribution limits (compared to Coverdell ESAs and Trump accounts).
• States offer their own plans, and some states provide tax deductions for contributions (for example: NC does not, but SC does). But you are not limited to using your state’s plan. Ryan has written about that here. Nor are you required to attend a school in the same state as your 529 plan.
• You remain in control of using the funds. The beneficiary does not receive full control at 18 or 21, like a custodial UTMA/UGMA brokerage account.
• Leftover funds can retain a tax benefit when rolled into a Roth IRA, repurposed to another beneficiary in your family, spent on professional designations – or even saved for future generations.

WHAT expenses count as Qualified Withdrawals: This list is not all encompassing, but covers the major ones of note.

• Tuition
• Textbooks
• Room and board. What about off-campus housing? Yes, up to the amount that is listed on your school’s COA (cost of attendance).
• Laptop and computer software
• Trade school expenses, if they are on the Federal Student Aid list. Also, apprenticeship program expenses if they are registered with the US DOL or State Apprenticeship Agency.
• K-12 tuition expenses up to $10,000 per year per child. (Note: Not all states have adopted this expanded definition. You can check for details here.)
• New as of 2025: Admissions testing fees for SAT, ACT, or AP exams, but NOT application fees. Although keep in mind that during K-12 years, total withdrawals per year have to be under $10k/child, so if you are already taking withdrawals for those be mindful of the total.
• Special needs equipment.
• Student loan repayments of up to a $10,000 lifetime limit.

What does NOT count as qualified withdrawals

• Travel expenses to and from school – neither for the student nor parents.
• Health insurance, even if required by the institution.
• College application fees, as stated above.
• School sporting events tickets.

WHEN to take withdrawals

• Qualified withdrawals must be for expenses that occur within the same calendar year. Be mindful of that rule when reimbursing yourself from the 529 for expenses paid out of pocket. Withdraw enough from the 529 for that calendar year of expenses.
• When do you use funds if your 529 does not cover all years of college? There are different schools of thought there, and the answer is – it depends. Are you paying some expenses from cash flow? Or taking out student or parent loans? Are grandparents helping? We can help map this out for you. This decision also involves portfolio allocation. I have heard one school of thought to keep funds invested as long as possible before withdrawing funds, but that places undue pressure on an investment return. Sure, the market could have a really great year and earn you an extra percentage of funds to use, but it also very easily could go the other direction. A helpful reframe is to consider if you had cash now, that you knew you’d spend in the next 1-2 years, would you invest the cash now, knowing it is subject to market risk?

HOW to withdraw funds

• Navigate online to make a withdrawal. You’ll be prompted to select a reason and follow the prompts to either make the request online or with a paper form.
• You can pay expenses out of pocket, then reimburse yourself from the 529. Some people like to use a credit card for the reward points although the college may charge extra processing, offsetting any potential benefit.
• Funds also can be sent directly to an educational institution. Your specific school and 529 plan will be your best resource for exact instructions.

Other Q&A..

• If I have a CFNC account, do I need to take action with their recent portfolio swap? We will review them once changes go into effect and be in touch accordingly. Likely, no changes necessary unless a change was already warranted for your time horizon.
• Can I have one account and use it for multiple children? Sure, technically you can. However, it gets trickier to manage with varying time horizons. If your students overlap years in college, you have to change beneficiary back and forth for their respective expenses.
• Can I be an active day trader? Nope. You’re limited to specific funds offered by each plan, and limited to changing allocation twice/year. And I wouldn’t encourage this even if it were permitted!

Sometimes there are regrets about not saving more, and wondering what else can be done now that the expense is looming. Maybe there is some grief associated with less savings than desired. Or you always planned to use cash flow during later career years, but now you face having to weigh plans for your own retirement with plans for your kids’ education… which can get really tricky to navigate when there are competing goals for the same resources. How do you have those tough conversations with your student about finances when desires don’t line up with the balance sheet?

As always, we are here to add perspective and wisdom in these transition times. Congratulations to all the graduating seniors, and good luck to the rising seniors on the upcoming year of applications and decisions!

The content above is for informational and educational purposes only. The links and graphs are being provided as a convenience; they do not constitute an endorsement or an approval by Beacon Wealthcare, nor does Beacon guarantee the accuracy of the information.