Now You Can Do More with Your College Savings

Families often use 529 plans as one way to save for their children’s educations. Before the recent SECURE 2.0 Act changes, the money invested into 529 plans was only for qualified expenses for higher education, private school tuition, or student loan debt. Not using the funds for eligible expenses would mean a 10 percent penalty on the earnings and paying federal taxes on the amount withdrawn.

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Now you can rollover up to $35,000 from a 529 plan to an IRA

  • Fortunately, the SECURE 2.0 Act changes may make it possible for families to rollover up to $35,000 from a 529 plan to an IRA, however, these changes don't become permanent until 2024. This means you can plan to do more with unused educational expenses.

Start planning early, because the plan needs to be in place for 15 years

  • Beginning in 2024, you have the option to transfer up to $35,000 in unused 529 savings funds to an IRA for your plan's beneficiary. However, you have to meet certain requirements to have this option at your disposal, including having a 529 plan that's been in place for at least 15 years.
  • In other words, if you want to have this option for your children in their adulthood, you will need to open a 529 savings plan for them as soon as possible in order to start the 15-year clock.

If you use up all the money for college or other eligible expenses, that's great. If not, you can transfer some money to a Roth IRA for the 529 plan’s beneficiary, based on annual contribution limits until you reach a maximum of $35,000. This news is welcome for families who have been worried about saving too much money and like the idea of funneling that cash into their child's retirement accounts instead.

Want to learn more? If you’re interested in learning more about your options, contact your Oppenheimer Financial Professional. They are here to help you understand and plan for college savings as well as to help you achieve your own financial aspirations.