YOUR MONEY-Raid your kid's college savings? Sometimes it is OK

(The writer is a Reuters contributor. The opinions expressed are his own.)

By Chris Taylor

NEW YORK, July 23 (Reuters) - Lauren Greutman felt sick.

She and her husband Mark were about $40,000 in debt, and were having trouble paying their monthly bills. As recent homebuyers, the couple from Syracuse, New York, were already underwater on the mortgage and getting by on one income as Lauren focused on being a stay-at-home mom.

"We were in a really bad financial position, and just didn't have the money to make ends meet," remembers Greutman, now 33 and a mom of four.

There was one pot of money just sitting there: Their son's college savings, about $6,500 at the time. That is when they had to make a decision that no parent ever wants to make.

"We had to pull money out of the account, in order to keep the electricity on and pay the water bill," she says. "We thought long and hard about it and felt almost dishonest. But it was either leave it in there, or pay the mortgage and be able to eat."

It is a moral quandary faced by parents in dire financial straits: Treat your kids' college savings - often housed in so-called 529 plans - as a sacred lockbox, or as a ready source of funds that may be tapped when necessary.

Precise figures are not available, since those making 529-plan withdrawals do not have to notify administrators whether the funds are being used for qualified higher education expenses, according to the College Savings Plans Network. That is a matter between the account owner and the Internal Revenue Service.

TIAA-CREF, which administrates many 529 plans for states, estimates that between 10 percent to 20 percent of plan withdrawals are non-qualified and not being used for their intended purpose of covering educational expenses.

It is never a first option to draw college money down early, of course. Private four-year colleges cost an average $30,094 in tuition and fees for 2013/14, according to the College Board. Since that number will presumably rise much more once your toddler graduates from high school, parents need to be stocking those financial cupboards rather than emptying them out.

Joe Hurley, the so-called "529 Guru" and founder of, has a message for stressed-out parents: Don't beat yourselves up about it.

"The plans were designed to give account owners flexible access to their funds," Hurley says. "I imagine parents would feel some guilt. But I don't think they should. After all, it is their money."


Keep in mind, though, that there are often significant financial penalties involved. Lauren Greutman managed to avoid them, since at that time she was using a simple savings account to stash her son's college funds.

With 529 plans, though, it is another story. With non-qualified distributions, in most cases you are looking at a 10 percent penalty on earnings. Withdrawn earnings will also be treated as income on your tax return, and if you took a state tax deduction on the original money, withdrawn contributions often count as income as well.

Not ideal, of course. But if your other option for emergency funds is to raid your own retirement accounts, tapping college savings is a last-ditch avenue to consider. Not only because you do not want to blow up your own nest egg but because it could make relative tax sense. As the saying goes, you can borrow money for college, but not for retirement.

"If you think about it, a parent who has a choice between tapping the 529 and tapping a retirement account might be better off tapping the 529," says James Kinney, a planner with Financial Pathway Advisors in Bridgewater, New Jersey.

If the account is comprised of 30 percent earnings, then only 30 percent would be subject to tax and penalty, Kinney explains. And that compares favorably to a premature distribution from a 401(k) or IRA, where 100 percent of the distribution will be subject to tax plus penalty.

Lauren Greutman's story has a happy ending. She and her husband made a pledge at the time to restock their son's college savings as soon as they were financially able. It is a pledge they kept: Now 8 years old, their son has a healthy $12,000 growing in his account.

She even runs a site about budgeting and frugal living at Still, the wrenching decision to tap college savings certainly was not easy - especially since other family members had contributed to that account as well.

"We tried to take emotion out of it, even though we felt so bad," Greutman says. "Since we didn't have money for groceries at that point, we knew our family would understand." (Follow us @ReutersMoney or at; Editing by Lauren Young and Lisa Shumaker)

  • For some low-income workers, retirement is only a dream
    Associated Press

    For some low-income workers, retirement is only a dream

    The photo and his story went viral and thousands of people donated more than $384,000 for his retirement. With no money saved for retirement, home care worker Gwen Strowbridge, 71, of Deerfield, Florida, plans to stay on the job until she can't physically work anymore. Studies have found that about one-third of low wage workers like Strawbridge say they'll never be able to afford retirement.

  • Best Vanguard Funds for Your Retirement Savings

    Best Vanguard Funds for Your Retirement Savings

    Vanguard is the biggest fund company in the land, with more than $3 trillion in assets. So chances are high that many retirement savers have access to Vanguard funds in their 401(k) plans. But size is no guarantee of good results. Thirty-four Vanguard funds appear on a list of the 105 most popular mutual funds in employer-sponsored retirement savings plans. No other fund company comes close. Not surprisingly, of the 34 most popular Vanguard funds in retirement plans, 15 are index funds. And nine more are target-date portfolios—those set-it-and-forget-it funds that shift over time to more conservative allocations as the fund nears its target year. The remaining 10 are actively managed. We didn’t

  • Blighted lives: The true cost of diabetes
    BBC News

    Blighted lives: The true cost of diabetes

    Steven Woodman walks like an old man. He needs a stick to maintain his balance as he hobbles forward. Steven is only in his late 50s, but the loss of three toes on one foot means he's unsteady on his feet. It is type 2 diabetes that has led Steven to where he is now. More accurately, it's ignoring the warnings and advice around diabetes that has left him facing a life of disability. He was diagnosed with type 2 diabetes, closely linked to lifestyle and weight gain, when he was still a young man. Steven, who lives in Shrewsbury, freely admits that, at the time, he ignored his GP's advice. "I was in denial. I never took it that seriously, so I carried on eating, going to the pub - doing things

  • Trump Surrogates Continue Their Apologist Tour to Election Day
    The Fiscal Times

    Trump Surrogates Continue Their Apologist Tour to Election Day

    It’s a thankless job being a Donald Trump surrogate these days. The job fell to campaign manager Kellyanne Conway and Republican National Committee Chairman Reince Priebus this weekend, and both twisted themselves in verbal knots casting the Trump campaign as something other than a foundering ship that’s headed to the bottom. After promising to deliver a “closing argument” in a speech on Saturday in Gettysburg, PA, Trump instead dedicated part of his remarks to promising to sue each of the dozen or so women who have accused him of sexual assault.

    Bloomberg Video

    6th Party Plenum: What Is China's Agenda?

    Oct. 24 -- Liu Li-Gang, chief China economist at Citigroup, discusses China's 6th party plenum in Beijing and what could come out of it. He speaks to Bloomberg's Stephen Engle and Rishaad Salamat on "Bloomberg Markets."

  • Coke and Pepsi are finally ditching sugar
    Business Insider

    Coke and Pepsi are finally ditching sugar

    This past week we learned that PepsiCo is finally turning against sugar. On Monday, PepsiCo announced that by 2025, two thirds of its drinks will have 100 calories or fewer from added sugar, per 12 oz serving. Currently, these types of sugary beverages make up 40% of PepsiCo's drinks.

  • America's biggest banks are closing hundreds of branches
    Business Insider

    America's biggest banks are closing hundreds of branches

    According to the 3Q earnings report, the bank has 21 million mobile banking active users and 18% of deposit transactions are completed through mobile devices. "That’s better for customers, it’s also better for our shareholders," said Donofrio.

  • Oil down as Iraq says no cuts; Wall Street, Cushing draw limit loss

    Oil down as Iraq says no cuts; Wall Street, Cushing draw limit loss

    Oil prices fell on Monday after Iraq said it wanted to be exempt from an OPEC production cut, though prices drew some support from a rally in Wall Street shares and a draw in crude inventories at the U.S. storage hub of Cushing, Oklahoma. The Organization of the Petroleum Exporting Countries (OPEC) announced plans last month to cut output to boost prices, but has not yet given details on how it will reach the target. Iraqi oil minister Jabar Ali al-Luaibi said on Sunday the country, second largest producer in OPEC, wanted to be exempt from output curbs as it needed more money to fight Islamic State militants.

  • Former CEO explains how to nurture star employees
    Yahoo Finance

    Former CEO explains how to nurture star employees

    High-potential performers (or Hi-Pos) stand out due to their associative thinking skills—which help solve problems and drive innovation—their strong emotional awareness, and their incredible perseverance, according to Carter Cast, a clinical professor of innovation and entrepreneurship at the Kellogg School and former CEO of, a division of Walmart (WMT). Putting a mirror up in front of people can help them recognize weaknesses, triggers, and gaps that may be impeding self-regulation and performance.

  • 3 Great Dividend Stocks That Could Double Their Payments -- The Motley Fool
    The Motley Fool

    3 Great Dividend Stocks That Could Double Their Payments -- The Motley Fool

    According to the latest economic data, average household income is down 2.4% from its peak in 1999. That implies that most Americans have not gotten a real raise in years. That said, while employers are stingy to their employees, companies are pretty generous to their investors. In fact, the following three companies are likely to double the income streams they pay investors over the next few years. A pipeline of income growth One of the reasons why refining giant Phillips 66 (NYSE:PSX) launched its midstream MLP Phillips 66 Partners (NYSE:PSXP) was to give investors an opportunity to collect a rapidly growing cash flow stream. That is why, when the MLP went public in late 2013, it stated that

  • Jeff Bezos, Jamie Dimon, Warren Buffett agree on the No. 1 priority for business
    Yahoo Finance

    Jeff Bezos, Jamie Dimon, Warren Buffett agree on the No. 1 priority for business

    In recent weeks, we’ve heard Warren Buffett, Jamie Dimon and Jeff Bezos talk about managing their businesses. At the Economic Club of Washington DC in September, JPMorgan CEO Jamie Dimon discussed what eventually led to his ouster from Citigroup in 1998. JPMorgan Chase is the largest bank in America.

  • 527 South Koreans seek Note 7 payback from Samsung
    Associated Press

    527 South Koreans seek Note 7 payback from Samsung

    Hundreds of South Korean Galaxy Note 7 smartphone owners filed a lawsuit against Samsung Electronics on Monday over its handling of the fire-prone device. Attorney Peter Young-Yeel Ko, head of the Harvest Law Firm, said the 527 plaintiffs want Samsung to compensate them for the costs to visit shops to exchange their phones, for the hours they had to wait while transferring data and for psychological harm from using a hazardous product. The Galaxy Note 7 smartphone was recalled twice in an unprecedented consumer safety crisis.

  • Japan swings back to September trade surplus

    Japan swings back to September trade surplus

    Japan swung to a bigger-than-expected trade surplus in September, as tumbling imports offset lacklustre shipments overseas, official data showed Monday. The value of Japan's exports fell again, with vehicles and steel among the worst hit sectors, as a stronger yen clouds the country's trade picture. It also reversed a surprise trade deficit in August.

  • World
    WSJ Live

    Islamic State Burns Sulfur Stocks Near Mosul

    On Saturday a plume of noxious smoke drifted over a base with U.S. troops involved in the Iraqi offensive to retake the city of Mosul. Islamic State militants had set fire to sulfur stocks at a factory south of Mosul on Thursday. Photo: Reuters

  • Business
    Money Talks News

    9 Tips to Ensure You’ll Have Enough to Retire

    Life expectancy for women and men in 1970 was just short of 71 years, for example, so retirement funds did not have to see most people to age 90 or 100. Today, those of us approaching retirement are playing a very new game. Will Social Security be your primary source of income in retirement?

  • AT&T, Time Warner CEOs say mega-merger is all about speed and mobility

    AT&T, Time Warner CEOs say mega-merger is all about speed and mobility

    The companies do not compete anywhere, Stephenson said, adding mergers of this nature usually get done by making concessions to regulators. Stephenson said content and distribution are converging, and he argued that this deal is a natural evolution of the industry. Any innovation will be available to the entire marketplace, Stephenson added.

  • Chesapeake Energy Analysts Change Their Tune

    Chesapeake Energy Analysts Change Their Tune

    On Wednesday evening, Chesapeake Energy Corp. (NYSE: CHK) stock closed at $6.72. Shares dropped by more than 5% to $6.36 early Thursday morning as the company kicked off its first investor day presentation in two years. The downturn was very likely the result of the company’s forecast for 2016 and 2017. Production growth is estimated at flat to up 3% for 2016 and at down 5% to flat for 2017. And that comes at the cost of higher capital spending. We looked at Chesapeake’s presentation in some detail on Thursday. By the end of the day Thursday, Chesapeake stock had regained all its lost ground and added 2.8% besides to close at $6.91. But by the early afternoon Friday, shares traded down about

  • The $1.7 Trillion Oil Industry Isn’t Going Anywhere

    The $1.7 Trillion Oil Industry Isn’t Going Anywhere

    This week’s oil prices put the industry at a value of $1.7 trillion – almost three times larger than the $660 billion in revenues generated from all major raw metals and minerals combined. Figures compiled by the Visual Capitalist show that the sheer magnitude of international oil consumption will increase as countries leave coal behind and plan for the spread of natural gas and green energy. Oil producers extract 34 billion barrels of oil from the planet every year to provide the 94 million bpd the planet consumes to travel, build and illuminate.

  • What to expect from Apple’s fourth-quarter earnings tomorrow

    What to expect from Apple’s fourth-quarter earnings tomorrow

    It’s going to be a busy week for Apple. Tomorrow (Oct. 25), the company will announce its fourth-quarter earnings for its fiscal year. Two days later, it’ll host an event to show off what many expect to be a refresh to its laptop and desktop computer lines. While the company may be ramping up for a big holiday season, with hopes of selling truckloads of its new iPhones and computers, tomorrow’s earnings call will reveal how sales fared over what has traditionally been Apple’s slowest period. In recent quarters, Apple has reported its first quarterly declines since it started selling the iPhone nearly a decade ago. Whether the company was able to reverse that decline in the fourth quarter—which

  • Business

    In insurance, Big Data could lower rates for optimistic tweeters

    This could lead to future insurance cover based on "sentiment analysis", in which Big Data and artificial intelligence make predictive models ever more accurate. Swiss Re says technological advances will cut the price of insurance protection and help individuals and firms make better decisions through programmes that offer advice and incentivise improvements in areas such as health and driving. Social media monitoring is one of several advances insurers are examining to improve the pricing of policies.

  • Business

    Australia's largest private trade delegation to visit China

    Australia's largest ever private trade delegation is due to arrive in China on Sunday, just over a week after 18 employees from Australian gaming giant Crown Resorts Ltd were detained there for alleged gambling crimes. More than 200 delegates, including Queensland state ministers, agricultural producers and exporters will be on the visit to Shanghai aimed at building on the A$160 billion ($120 billion) trade relationship between Australia and China. "We have brought together businesses from banks to exporters and freight companies," Ben Lyons, the group's leader, said in a statement.

  • Oil prices fall as Iraq resists joining output cut

    Oil prices fall as Iraq resists joining output cut

    Oil prices fell on Monday as Iraq said it wanted to be exempt from an OPEC deal to cut production, though losses were capped by Iran saying it would encourage other members to join an output freeze. U.S. West Texas Intermediate (WTI) crude was down 37 cents at $50.48. Falah al-Amiri, head of Iraqi state oil marketer SOMO, added that Iraq's market share had been compromised by the wars it has fought since the 1980s.

  • Dominos CEO: We got ahead of the curve in technology
    Yahoo Finance

    Dominos CEO: We got ahead of the curve in technology

    Other than the company’s new recipe rolled out in 2010, in one word: technology. “We got into it early,” said CEO Patrick Doyle. Doyle said a big part of the company’s success is “early investment.” And he added the company hasn’t stopped.

  • Technology
    Associated Press

    Attacks on the internet keep getting bigger and nastier

    Manchester, New Hampshire-based Dyn Inc. said its server infrastructure was hit by distributed denial-of-service, or DDoS, attacks. The attack temporarily blocked some access to popular websites from across America and Europe such as Twitter, Netflix and PayPal. Members of a shadowy hacker group that calls itself New World Hackers claimed responsibility for the attack via Twitter, though that claim could not be verified.

  • Stock Market Update from

    Stock Market Update from

    2:00 pm: [BRIEFING.COM] The broader market has traded in sideways fashion as the S&P 500 remains up 0.4%. The leaderboard remains little changed with energy (-0.8%) and telecom services (-0.7%) leading to the downside. On the other hand, influential