Now you can do something with the college savings plan money that wasn’t spent on education.  Maybe your child or grandchild didn’t choose college.  Or maybe they received a scholarship.  There’s an opportunity here to put that money back into your own hands without the tax pain.

Under legislation signed into law last month, investors can roll up to $35000 from a 529 into a Roth IRA account starting next year. 

If you had money leftover from a plan originally intended for a child’s college (or kindergarten thru 12th grade) costs can morph into retirement dollars, all without taking a withdrawal that used to come with a tax bill.  Moving the funds to a Roth provides a great retirement vehicle.

This is part of the Secure 2.0 bill signed into law last year.

Of course, there’s a bit of a hitch.  The law doesn’t go into effect until 2024 and the 529 account that money is moving from has to have been in place for at least 15 years  and contributions and growth from the last 5 year can’t be moved over.

Still a great deal.

Some other goodies in the bill include:

  • The age to start taking required minimum distributions (RMD’s) from traditional individual retirement plans and 401(k)s rises to 73 this year and to 75 a decade later, giving accounts more time to grow in value.
  • Penalties for taking RMDs are cut in half
  • Companies can make matching contributions to employer-sponsored Roth accounts
  • The current $1000 catch-up contribution to traditional IRAs will be indexed for inflation for those aged 50 and over in 2024 and later.

These are ideas that you need to be aware of well before you start using them to take full advantage of the benefits. 

It might be time to think about that tax plan.

Give us a call – AFS – come to the best for less