May 29 is the day when states try to boost interest and participation in 529 college savings plans.
Every state offers a 529 plan, as they are usually protected from federal and state taxes.
Fees and expenses vary widely from plan to plan, so it’s important to read the fine print.
No matter which state’s plan you use, there’s no tax due when students access the money for qualified education expenses.
There is also a big change that makes 529 plans even more appealing.
Last year’s Secure Act 2.0 made it possible for unused 529 funds to be transferred to a Roth IRA account, without any taxes or penalties.
The new rule takes effect in 2024 and there are some basic requirements to know:
- the 529 account must have existed for at least 15 years
- you can only transfer a lifetime maximum of $35,000
- transfers are subject to annual Roth IRA contribution limits
