College Planning

If you have a 529 education savings plan, it can now be converted to a Roth IRA. Both plans are funded by after-tax money. Initially, the money put into a 529 plan had to be used toward education expenses. If, for whatever reason, the money wasn’t needed for educational expenses and it was withdrawn for other purposes, you would be subject to a penalty and capital gains taxes. That is not the case anymore. After the passage of the SECURE Act 2.0, 529 plan account owners or beneficiaries can roll over 529 funds into a beneficiary-owned Roth IRA tax-free and penalty-free. Meaning, if you put money into the 529 plan and your child receives a scholarship or doesn’t attend school, the leftover money can now be rolled over into a Roth IRA.