Interesting Idea for Emergency Fund Savings

I went to the Financial Planning Association’s annual Symposium in September. This is a great opportunity for financial planners to get new information and catch up with old friends. As usual, it was a great event and I learned lots of cool stuff.

Our lunch keynote speaker was Joe Hurley, founder of the website Joe lives in New York but he says that Colorado is the Oz of 529 investment states.

One tactic that he himself is doing is using our Stable Value Fund 529 plan option for his emergency fund.  What?  You thought 529 plans were just for college, right?

Well, if you check out our local 529 website,, under the College Stable Value Plus option (managed by Met Life) you will see that the annual interest rate is 3.09%.  This is with no principal fluctuation. To compare, my Wells Fargo savings account is currently paying .01%! Both interest rates are subject to income tax if the 529 is not used for college savings – which in this example we are assuming it won’t be.

The deal with college savings accounts is that if you take money out that is not used to pay for qualified higher education expenses, you pay income tax (same as a savings account anyway) and a 10% IRS penalty on earnings withdrawn.  Big deal! Even after paying the penalty, your interest rate is 2.87% on the Stable Value 529 account. Wow!

Not only that, 529s use first in first out accounting.  So the first money you withdraw is your principal which is not subject to tax or penalty, no matter what you use the money for. The last money taken out is interest, so hopefully it will be compounding tax-deferred for a long time.

Thanks, Joe, for alerting me – and now you – to such a great savings alternative.


If these topics sound like they would be of interest to your employees, sales conference, or professional organization, contact me at 303-324-0014 or for more information.

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