A 529 plan is one of the best generational wealth transfer vehicles. Instead of just giving our kids or grandchildren money, it’s way better to give them the gift of education. Thanks to the SECURE Act 2.0, we will be able to roll over leftover 529 funds to a Roth IRA without taxes or penalties.
As a parent, it was rational to feel hesitant about funding a 529 plan or contributing too much. With restrictions in place on how the plan’s money could be spent, parents rationally hedged the way they saved for a college education.
In fact, one of the main questions that has come out of my 529 savings guide by age post is whether to contribute to a Roth IRA or a 529 plan to pay for college. Contributing to both plans, if you are eligible, is a smart move.
In the past, the only real option for 529 funds that were not used for some kind of secondary education program was to roll the money over to another beneficiary, either for school expenses or to repay student loans.
Thanks to the SECURE Act 2.0, the 529 plan becomes more valuable due to the Roth IRA conversion option. Here are the details.