Summary4 min read

Ramsey Everyday Millionaires: Should I Use a 529 or Mutual Funds for My Kids?

Date: January 26, 2026
Hosts: Ramsey Network (Unnamed hosts in provided transcript, possible Rachel Cruze and George Kamel based on style)

Overview

This episode tackles a common dilemma faced by parents planning for their children's future: whether to invest in a 529 college savings plan or opt for more flexible investing options like mutual funds. The discussion addresses parental concerns about changing educational landscapes, potential tax implications, and recent legislative updates. The hosts offer practical advice rooted in the Ramsey philosophy of responsible financial planning.

Key Discussion Points & Insights

1. Listener's Question and Background ([00:17]-[01:29])

Tammy (Caller) from Detroit explains her situation:
- She and her husband are financially stable and currently in Baby Steps 4, 5, and 6.
- They have an 8-year-old and a 5-year-old, with some college savings already started.
- They began a 529 plan for the 8-year-old but worry: What if the children don’t attend college?
- Concerned about penalties for non-qualifying withdrawals from a 529.
- Considering splitting savings between 529 plans and mutual funds for flexibility, though aware of the latter’s tax implications.

2. Host Response: Balancing Flexibility With Savings Incentives ([01:29]-[02:42])

Host Empathy:
- Host shares their own family's similar debate, acknowledging the shifting landscape of higher education (“college has shifted so much even since COVID”).
- Recognizes that the college decision is years away and can feel like a “big question mark.”
529 Advocacy:
- Host leans toward continuing to fund 529 plans because paying for a child’s college is a “gift” that can offer significant benefits as young adults.
- Affirms the value of a degree: “I just think from 18 to 21, you know … I just think it’s a great step. I really do. If you’re able to … I think you learn a lot about yourself. I think that getting a degree makes you marketable—all the things—if you’re able to pay for it.”
- Notes that different Ramsey personalities have varied opinions on college, referencing Ken Coleman’s distinct perspective.
Mutual Fund Option:
- If doubts remain about college attendance, the host suggests slowing 529 contributions and allocating more to mutual funds for flexibility, with the caveat of higher taxes and no special education benefits.

3. New Legislation: Secure Act 2.0 Creates Options ([02:42]-[02:52])

Host Highlights a Game-Changer:
- With the Secure Act 2.0, unused 529 funds (up to $35,000) can now be rolled over into a Roth IRA for the beneficiary, over time.
- Quote: “You can roll over, you know, up to 35k with the new Secure Act 2.0 from that 529 over to a Roth IRA over a period of time. So you’re not out of luck.”
Implication:
- This reduces the risk of “wasted” college savings if a child chooses a path that doesn’t require higher education.

Notable Quotes & Memorable Moments

Caller Concern:
- “My question is if we should fully invest everything in a 529 because our fear is that we do that and one or both of the kids end up not wanting to go to college … then we have all of that money tied up in a 529 that we're going to get penalized for taking it out outside of a college plan.” – Tammy (00:40)
Host Empathy:
- “We have the same discussion. You know what I mean? Because you're like, college has shifted so much even since COVID. You're like, oh my gosh, the fact that tuition's … it's an interesting time. And when our kids go to school, I mean that's in a decade or more." – Host (01:36)
Practical Advice:
- “If that fear is still there, if you want to, you could slow down the 529 and depend on a mutual fund. But just know you’re going to be paying those taxes. It does not have as good of a benefit.” – Host (02:25)
Legislative Update:
- “You can roll over, you know, up to 35k with the new Secure Act 2.0 from that 529 over to a Roth IRA over a period of time. So you’re not out of luck in their name.” – Host (02:42)

Timestamps for Important Segments

00:17 – 01:29: Tammy poses her question; details about current savings and family’s approach.
01:29 – 02:42: Host discusses pros and cons; advice on balancing flexibility and maximizing benefits.
02:42 – 02:52: Secure Act 2.0 update—529 rollover into Roth IRA.

Conclusion

This episode provides practical reassurance for parents juggling uncertainty about their kids’ paths after high school. The hosts validate the caller’s concerns and weigh the tax-advantaged structure of 529s against the flexibility of mutual funds. The update about the 529-to-Roth IRA rollover (Secure Act 2.0) gives parents even more options and peace of mind that their diligent savings will not go to waste, regardless of their children’s futures.

Tone: Conversational, reassuring, practical, with a focus on flexibility and long-term financial wisdom.

Loading summary

Transcript9 lines

[00:00]
A
Foreign. This episode is brought to you by Smartvestor. Connect with an investing pro near you at ramseysolutions.com Smartvestor Tammy is up next in Detroit. What's going on, Tammy? How can we help today?
[00:18]
B
Hi, thanks for taking my call. I have a question in regards to kids after they graduate so they turn 18. My husband and I are in steps four, five and six. We've been kind of saving for the kids college fund for the past probably three to six months. So we do have some funds right now in those accounts. I have an 8 year old and a 5 year old. We did start a 529 for our 8 year old. But kind of looking at the way we're investing, I would kind of like to like hone in on what we're doing and what our plan is. My question is if we should fully invest everything in a 529 because our fear is that we do that and one or both of the kids end up not wanting to go to college or wanting to do something else. And then we have all of that money tied up in a 529 that we're going to get penalized for taking it out outside of a college plan. The only thought was if we did half in a 529 for each of them and then half in a mutual fund, even though I know those are going to be like the mutual fund is going to be taxed.
[01:27]
C
Yeah.
[01:27]
B
If we, you know, take that out later on.
[01:30]
C
Yeah. No.
[01:31]
B
Kind of like a safe bet though to not put all of our eggs in one basket. Totally.
[01:35]
C
No, I hear you. And we, you know, I would say my husband, I were, we have the same discussion. You know what I mean? Because you're like, college has shifted so much even since COVID You're like, oh my gosh, the fact that tuition's, I don't know, it's just, it's an interesting time. And when our kids go to school, I mean that's in a decade or more. So it's kind of that big question mark. And so I'll tell you what we' doing, Tammy, that very similarly. Yeah. We're still funding the 529 because we, our plan is that they, I want them to go to college and if we're able to pay for that, that's a gift to them. Starting off because I just think from 18 to 21, you know, and all the personalities have a little bit of a different opinion about the college thing. Ken Coleman has kind of a different one. But I just think it's a great step. I really do. If you're able to because I think you learn a lot about yourself. I think that you getting a degree makes you marketable all the things if you're able to pay for it. I mean, but if that fear is still there, you, if you want to, you could slow down the 529 depend on a mutual fund. But just know you're going to be paying those taxes. It does not have as good of a benefit. But if you guys get five years down the line and you're like, oh, wow, we probably they are going to go to school, you can throw more in.
[02:43]
A
Yeah. And you can roll over, you know, up to 35k with the new Secure Act 2.0 from that 529 over to a Roth IRA over a period of time. So you're not out of luck in their name.
[02:52]
C
Yeah.