What happens if I overfund a 529 and don't use all the money?

Overfunding is far less scary than it used to be. If you withdraw earnings for non-qualified expenses, you'll owe ordinary income tax plus a 10% penalty on the earnings portion only — your original contributions always come back tax- and penalty-free. But you have better options first: change the beneficiary to another family member, use up to $10,000 toward the beneficiary's student loans, save it for grad school, or roll up to $35,000 into the beneficiary's Roth IRA over time. The 10% penalty is also waived if the beneficiary receives a scholarship (up to the scholarship amount), dies, or becomes disabled. Because 529s have no time limit, you can simply leave money invested for a future grandchild. Reach for the penalty-free routes before taking a taxable withdrawal.