Ask Money

A college savings plan for retirement

Chris Farrell Nov 4, 2010

Question: I have saved reasonably well and own investment property, coupling those with what I will receive in retirement benefits, I expect to retire reasonably comfortably. My wife is quite a bit younger than I (about 20 years), so I have begun pondering what I will do after I retire, which I hope to be able to do at 65 (I am 51 now). I am thinking the best way to keep busy, interested and out of her hair would be to go back to college. I am thinking of a double major in economics (or economics history) and philosophy, two topics I highly enjoy. I am wondering if any of the tax-deferred college savings plans can be used for myself, such as a 529? If not, any suggestions on how best to prepare for such a retirement?

For what it’s worth, we do not have children, at my age I am really questioning whether or not I still want them (though I have always been the favorite uncle and I know I will miss something). We may consider moving to a college town after I retire, as well, somewhere the winters are not so harsh (Ashland Oregon comes to mind!).Bill, Minneapolis, MN

Answer: Studying economic history and philosophy in beautiful Ashland sounds wonderful. What a great idea. Can I tag along?

As for saving for that education, with a 529 college savings plan there is no age limit. The savings plan is open to both children and adults. The earnings are tax free so long as you use the money to pay for qualified education expenses. It can be a smart move.

The drawback to your savings idea is if you change your mind. If you end up deciding college isn’t your dream retirement you will pay a penalty and ordinary income taxes on any gain when you withdraw the money from the plan. In other words, by investing with a 529 you give up some financial flexibility. I would stick with the more conservative investment options offered by a 529 plan, too.

As an aside, it appears that older workers are using 529s to pay for additional education after a job loss. This is a very different situation from your retirement planning. But it’s something for aging workers to consider since jobs are less secure than before. It often takes more schooling to shift jobs or career.

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