College Savings: Not Just for College

College Savings: Not Just for College

Enhanced Benefits from 2022 Federal Tax Law Changes

Effective January 1, 2024, qualified “leftover” college savings account funds may be transferred to a Roth IRA free of any tax, penalty or applicable income limits.  

As a result, college savings accounts now, more than ever, will be recognized as a versatile tax-advantaged investment vehicle as it addresses the two most common long-term investment objectives: paying for education and retirement expenses. College savings accounts can now be an important tool for funding these important expenses from "cradle to grave".  There are qualifying factors that must be considered prior to transferring the remaining college savings funds to a ROTH IRA.  Our team can answer questions and connect you with our network of tax professional who can provide additional guidance when concerned about potential taxable events.

College Savings: 

With the cost of education (K - 12 and higher education) on the rise, it is important to understand the options available within tax-advantaged college savings accounts.

Below we share several benefits and key factors on why college savings accounts should be considered part of your overall financial plan no matter your season of life.

Benefits

• Federal Tax Benefits: Earnings from your college savings plan are not subject to federal tax. Not while they are growing in the account and not when you withdraw them either (as long as they are used for qualified education expenses).

• State Tax Benefits: Depending on the account owner's resident state tax rules, some or all contributions may be tax deductible.

• Distribution Control: Account owners have full control over the account and how the funds are spent.

• Contributions: Anyone can contribute to the account to further assist in reaching educational goals of the account beneficiary.

Flexibility

• More than Tuition: Funds from your 529 savings plan can pay for required books and supplies, on- and off-campus housing and technology needs.

• Transferable: 529 savings plan balances can be transferred to another child, a different member of your family — or even to continue the account owners education. *New in 2024, remaining funds may be transferred to a ROTH IRA.

• More than College: You can use a 529 savings plan for K-12 tuition (up to $10,000 per year, per student), as well as for eligible continuing education after — or instead of — college. Withdrawals for K-12 expenses may not be exempt from state tax in certain states.