Our youngest daughter has $23K invested for college and we are still adding to it. We expect to put in another $5500 before she turns 18 in just over 2 years.
I'm getting concerned we have too much invested. Of course, I don't know that for sure. It's just based on how well things are going with our older daughter cost wise.
If we have cash leftover from our older daughter in her Education Savings account we can roll it to our youngest daughter, thus she will have even more money!
If we have too much money invested and go to withdraw it, we will have a penalty of 10%. I was thinking of changing the last amount of contributions for our daughter to our Roth IRA accounts. Actually, I would increase my husband's TSP retirement contributions which would lower our taxable income. We already maximize the Roth IRAs thus why I would put the money in the TSP. If we needed to withdraw that college money I would take it from the Roth IRAs since contributions are always available tax and penalty free.
I did a little looking while writing the post though. It turns out for both ESA and 529 plans, extra funds that can be contributed to having received a tax free scholarship can be with withdrawn and the penalty waived! Thus far my oldest daughter does have a large tax free scholarship that would easily help her withdraw and excess tax free.
Since this could be the case for our youngest daughter, I'm going to leave it be for now and just continue as planned. If anyone has any other thoughts though let me know. 
College Investment Thoughts
April 16th, 2016 at 04:17 pm
April 17th, 2016 at 01:44 pm 1460897079
April 17th, 2016 at 07:50 pm 1460919050
April 18th, 2016 at 01:21 pm 1460982110
Even if you withdraw money with the scholarship exception you would have to pay tax on the earnings. I believe that would just be taxed as ordinary income (I wasn't sure on this, but google seems to confirm this). So you would be stuck with unnecessary taxes versus doing a little more planning to pay -0- in taxes. (Paying ordinary income tax on gains might not sound like a huge deal, but it would completely defeat the whole purpose of the "tax shelter". It would be more of a tax penalty than if you had just invested in taxable accounts). Just something else to keep in mind. Plus long-term capital gains are taxed at 0% in the 15% tax bracket. So move it over and invest it for 12 months + 1 day, and you ensure the money stays tax-free.
April 18th, 2016 at 01:48 pm 1460983731
And to clarify, we have our investments in an Coverdale Educational Savings Account, not a 529. We never thought we could invest much more than the $2K per year per child, nor did our state tax situation make it worth getting any state tax deduction. If you don't pay state income tax, difficult to take advantage!
April 18th, 2016 at 05:54 pm 1460998460
Of course, you can only move over the education expense that you have any given year. Since younger daughter is not in college yet, I'd consider just not adding to the ESA any further. You can start spending older daughter's ESA and maybe transferring the other ESA to her, to get it out tax-free? Might take some time and a plan to do this?
But I Am speaking from a tax standpoint. Financial aid considerations are also taken into account when structuring investments. If you don't want to deal with taxable investments, you can always go with the retirement plan.
I guess I don't see the point in keeping until 30 if you just have to pay ordinary tax on all the gains at that point? Or is the thinking more that maybe they will have their own kids to transfer the ESAs too? If most people these days aren't having kids until 30+, maybe not a useful plan? I guess I don't know what the point of that would be.
April 19th, 2016 at 09:34 pm 1461098096
April 19th, 2016 at 09:40 pm 1461098427
For now, I think I'm just keeping things the same. There are too many other unknowns to make a change. I was just pondering ideas.