Cashing Out a 529

Valerie shouldn't cash out her 529 college savings while she's on Baby Step 2, but she should stop adding to it.

QUESTION: Valerie is on Baby Step 2 and has $50,000 in debt. They have $8,000 in a 529 college savings plan. Should they cash it in to pay on the debt? It’s a bad idea, according to Dave.

ANSWER: No, but stop adding to it temporarily until you get through Baby Step 3. Then you do Baby Steps 4, 5 and 6 at the same time. Start contributing again when you start contributing to the retirement again.

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