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IMO if the child doesn't go to college, the money in the 529 goes to someone else (their sibling, their kids)
But I don't have a question of whether my kids (or my sibling's kids) go to college, but only a matter of where.


In your case, you seem fine with changing the beneficiary to someone else somewhere down the road. In my case, I have twins, and so both kids were going to school at the same time. It was only my intention to pay for my children's college, and never my intention to pay for any nieces or nephews. Even in the case of grandchildren, that would be so far down the road that I would still prefer to have my money available for other things and not tied up to only be used to pay for college.

Yes, I realize that I could take that money out at any time and pay that 10% penalty, but my preference is to not have to pay a penalty for the privilege of accessing my money for a different expense, plus I like the flexibility that I have by not having the money in something earmarked for college only.

I don't know what the OP thinks about using that money for other relatives, and it is good that you have pointed out that you can just change the beneficiary to another relative. For me, I don't consider myself responsible for paying anyone else's college expenses than my own children, and if the money is not used for that, I prefer to reallocate it to something else such as my retirement or the kids' weddings or helping them out with house downpayments or other large expense. I don't mind still using that money on them if that is what I choose to do at that time, but I don't like the inflexibility in only having the 529 for someone's education.

Something that has not been pointed out is that 529s can be tax-deductible in some states, and so that is also a consideration to be made. I don't live in one of those states, so that's as much as I know about that. Perhaps someone else can shed some light on the tax impact as a benefit.
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