{"id":12104,"date":"2023-09-15T14:44:27","date_gmt":"2023-09-15T14:44:27","guid":{"rendered":"https:\/\/prosfunds.com\/news\/the-biggest-downside-to-529-plans-is-about-to-go-away-now-theyre-a-no-brainer-expert-says\/"},"modified":"2023-09-15T14:44:29","modified_gmt":"2023-09-15T14:44:29","slug":"the-biggest-downside-to-529-plans-is-about-to-go-away-now-theyre-a-no-brainer-expert-says","status":"publish","type":"post","link":"https:\/\/prosfunds.com\/?p=12104","title":{"rendered":"The biggest downside to 529 plans is about to go away. Now they\u2019re a \u2018no-brainer,\u2019 expert says"},"content":{"rendered":"
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To be sure, 529 college savings plans already had a lot going for them.<\/p>\n

Now, thanks to\u00a0“Secure 2.0,” a slew of measures affecting retirement savers, they’re about to be even more attractive.<\/p>\n

Starting in 2024, savers can roll unused money from\u00a0529 plans\u00a0over to\u00a0Roth individual retirement accounts\u00a0free of income tax or tax penalties. Among other limitations, the 529 account must have been open for 15 years and account holders can’t roll over contributions made in the last five years. Rollovers are subject to the annual Roth IRA contribution limit, and there’s a $35,000 lifetime cap on 529-to-Roth transfers.<\/p>\n

“It becomes a no-brainer at this point,” said Marshall Nelson, wealth advisor at\u00a0Crewe Advisors in Salt Lake City.<\/p>\n<\/div>\n

The benefits of a 529 plan<\/h2>\n
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These plans have been steadily gaining steam for a number of reasons.<\/p>\n

In some states, you can get a tax deduction or credit for contributions. Earnings grow on a tax-advantaged basis and, when you withdraw the money, it is tax-free if the funds are used for\u00a0qualified education expenses\u00a0such as\u00a0tuition, fees, books, and room and board, or even\u00a0apprenticeship programs.<\/p>\n

A few states also offer additional benefits, such as\u00a0scholarships\u00a0or\u00a0matching grants, to their residents if they invest in their home state’s 529 plan.<\/p>\n<\/div>\n

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More from Life Changes:<\/h2>\n
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Here’s a look at other stories offering a financial angle on important lifetime milestones.<\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n

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Further, you can now put some of the funds toward your\u00a0student loan tab: up to $10,000 for each plan beneficiary, as well as another $10,000 for each of the beneficiary’s siblings.<\/p>\n

And yet, total investments in 529s fell to $411 billion in 2022, down nearly 15% from $480 billion the year before, according to data from College Savings Plans Network, a network of state-administered college savings programs.<\/p>\n

“Last year, we saw a pretty noticeable reduction in contribution behavior,” said Chris Lynch,\u00a0president of\u00a0tuition\u00a0financing at TIAA. Regular contributions to a 529 college savings plan took a back seat to paying more pressing bills or daily expenses.<\/p>\n<\/div>\n

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We’re going to see a spike in 529 usage.<\/p>\n

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Marshall Nelson<\/p>\n

wealth advisor at\u00a0Crewe Advisors<\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/blockquote>\n

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Plus, there was a major sticking point: Many would-be college students are\u00a0rethinking their plans altogether. Some are opting out entirely or considering a local and less expensive\u00a0in-state public school\u00a0or\u00a0community college.\u00a0<\/p>\n

Now, 529s offer more flexibility, even for those who never enroll in college, Lynch said.<\/p>\n

“A point of resistance that potential participants have had is the limitation around, what happens if my kid gets a scholarship or decides they’re not going to college.”<\/p>\n

In such cases, you could transfer the funds to another beneficiary, or withdraw them and pay taxes and a penalty on the earnings. If your student wins a scholarship, you can typically withdraw up to the amount of the scholarship penalty-free.<\/p>\n<\/div>\n

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The added benefit of being able convert any leftover funds into a Roth IRA tax-free after 15 years, up to a limit of $35,000, “helps to eliminate that point of resistance,” he said.<\/p>\n

“We’re going to see a spike in 529 usage,” Nelson predicted.<\/p>\n

Even if someone in their mid-20s put $35,000 in a Roth IRA and just left it alone, that could be close to $1 million 40 years down the road, he said.<\/p>\n

“It’s something I see catching on,” Nelson added. “Now they have the option to use that money to supplement retirement; that’s a huge win.”<\/p>\n<\/div>\n<\/div>\n

Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

To be sure, 529 college savings plans already had a lot going for them. Now, thanks to\u00a0“Secure 2.0,” a slew of measures affecting retirement savers, they’re about to be even more attractive. Starting in 2024, savers can roll unused money from\u00a0529 plans\u00a0over to\u00a0Roth individual retirement accounts\u00a0free of income tax or tax penalties. Among other limitations, […]<\/p>\n","protected":false},"author":1,"featured_media":12105,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"content-type":"","footnotes":""},"categories":[38],"tags":[],"class_list":{"0":"post-12104","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-news"},"yoast_head":"\nThe biggest downside to 529 plans is about to go away. 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