529 Optimal Withdrawal Strategy

[@kurtheidelbach]

How to withdraw the most money strategies are not boring. It’s much better than this video

[@johnnybregar]

I’m a little confused as to why it is so important to make the withdrawals the same every semester. What I’m personally interested in is how to make withdrawals to maximize my return on investment, and also to maximize my chances of getting financial aid the next year. Do you have any insight on this? Thanks for doing this video.

[@MatthewOBrien314]

Yeah, that is a good question. I chose to get the same withdrawal each semester to make the payment burden uniform over the 4 years, so it wasn't extra hard in the beginning or end or anything like that. If you just want to maximize your return on investment, then you'll probably get an answer like withdraw 0 for as long as you can, then withdraw it all at the end (assuming it is going up). The longer you wait, the more it will go up. If you can handle making the full payments early on, then do that. If you want to spread out the help from the 529, then do what I said in the video. It just depends on if you have the money up front to pay for the early semesters.

[@paulclough8541]

Dontyou have to match up the expense paid for in each semester with the actual withdrawal?

[@paulclough8541]

If you waited the last semester, the withdrawal will most likely be higher than the expense. I think you might be creating a tax and penalty situation.

[@alexchen7729]

Interesting video/puzzle but I don’t think it follows real world use of the 529. First off if you need the money soon, you shouldn’t be investing it in a vehicle which can earn 6% because that means it could also lose 6%. Also it’s not clear that dividing the payments out equally each semester makes sense. Maybe if the markets are down you want to withdrawal less money that semester, etc. It seems to be a much more complex situation.

[@Llakar]

You could factor in inflation since you need more money in the future to buy the same things today.

[@MatthewOBrien314]

Yeah, I showed college prices go up 3% each year, but then I made my algorithm give the same amount each semester. I should re-do it so you get 3% more each year.