Using a 529 to avoid taxes

Starting in 2024, owners of a 529 plan can rollover unused balances into a ROTH. Thanks to the 2022 Secure Act, Americans who saved for college in 529 plans will soon have a way to rescue unused funds by converting the account to a ROTH.

With specific limitations, investments would keep growing tax-free in a ROTH ACCOUNT where future retirement withdrawals would be tax-free. Funds can also be used to pay off student loans up to $10,000 without penalty.

The rollover measure — which takes effect in 2024 — does come with some limitations. Amongst the largest is a $35,000 lifetime cap on transfers limited to annual contribution limits. Another limitation to consider is the rollover can only be made to the beneficiary.

Having said that, this proposal allows your gift of a 529 plan to go beyond education. Helping them graduate only opens the doors to their careers and ambitions. Now you can help them plan for their future. The possibilities are your limitations.

Don’t get me wrong! There are some pretty hefty limitations, but if used properly as a planning strategy to create more wealth… TAX FREE AND INCOME TAX FREE, I would think this a good proposal.

Let me know your thoughts. I Plan. Do you?

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