WCI #463: 529 Plans: How Much to Save and What They Can Be Used For

32 snips

Mar 19, 2026

Tyler Scott, former dentist and President of Planning at White Coat Planning, guides listeners through education savings choices. He breaks down how much to fund a 529 for a newborn and why early saving can lead to overfunding. He explains qualified uses, safety valves for excess funds, the new 530A “Trump” accounts, and whether 529s can cover continuing education like CME.

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INSIGHT

Overfunding Is The Likely Default For New Parents

Overfunding a 529 is common for parents who start when children are infants because future school choices and costs are unknown.
Jim notes most WCI listeners will likely end up with $100k–$200k+ in a 529 and thus should plan safety valves now.

ADVICE

Nonqualified Withdrawals Tax Only The Earnings

If you take a nonqualified 529 withdrawal, you only pay ordinary income tax and a 10% penalty on the earnings portion, not on your contributions.
Example: a $10k nonqualified withdrawal with 25% earnings costs about $1,250 in taxes and penalty at a 40% marginal rate.

ADVICE

Use Scholarship, Beneficiary, Or Grandchild Safety Valves

Use safety valves rather than panic if a 529 is overfunded: take penalty-free withdrawals for scholarships, change beneficiary to family, or hold funds for graduate school.
Consider leaving funds for unborn grandchildren to let tax-free growth compound for decades.

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529 plans are one of the most popular ways for families to save for education—but many parents still have questions about how much to contribute and what those funds can actually be used for.

In this episode of the White Coat Investor Podcast, Dr. Jim Dahle answers several listener questions about 529 education savings plans, including how much parents might consider saving for a newborn child and how to think about long-term education funding goals.

We also discuss the concept of "Trump accounts" (530A accounts) and what these proposed or new account types are intended to do.

Finally, we explore whether 529 funds can be used for continuing education expenses such as CME, and how the rules around qualified education expenses actually work.

Understanding the details of education savings accounts can help physicians and other high-income professionals plan more effectively for their children's education while staying tax-efficient.

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The White Coat Investor Podcast launched in January 2017, and since then, millions have downloaded it. Join your fellow physicians and other high income professionals and subscribe today! Host, Dr. Jim Dahle, is a practicing emergency physician and founder of The White Coat Investor blog. Like the blog, The White Coat Investor Podcast is dedicated to educating medical students, residents, physicians, dentists, and similar high-income professionals about personal finance and building wealth, so they can ultimately be their own financial advisor-or at least know enough to not get ripped off by a financial advisor. We tackle the hard topics like the best ways to pay off student loans, how to create your own personal financial plan, retirement planning, how to save money, investing in real estate, side hustles, and how everyone can be a millionaire by living WCI principles.

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00:00 WCI Podcast #463 05:10 How Much Should You Put in a 529 for a Newborn? 35:22 What Are 530A "Trump Accounts"? 57:05 Can You Use a 529 for CME or Continuing Education?