Prior to 2024, 529 Plan funds could only be used to pay for qualified expenses (e.g., tuition, books, computer, and room/board). If the account was overfunded, if a child received a full scholarship covering their cost of college, or if they decided not to attend college, there was no way to get the extra money out of the account without incurring a 10% penalty on the account’s earnings.
Now, beginning in 2024, a beneficiary of a 529 plan can now transfer the funds into a Roth Individual Retirement Account (IRA) without paying taxes or penalties.
529 accounts have been encouraging families with a tax-advantaged way to save for higher education expenses since the late 1980s. These accounts are usually sponsored by state governments and many states allow you to deduct your contributions on your state income tax return. The money can be withdrawn for qualified educational expenses without paying tax on any investment gains.
With beneficiaries able to roll over funds into a Roth IRA, the funds have the opportunity to benefit your child/grandchild later in life, becoming a valuable tool to transfer and build wealth over the long term.
For parents or grandparents who want to fund an education and help their child or grandchild set aside money for retirement, a 529 Plan may be a smart solution. Speak with a Jemma Financial Advisor to determine if a 529 savings account is right for your family.
Need assistance? Call 855.662.2121 or email info@jemmafinancial.com
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IMPORTANT NOTICE
You are now leaving the Jemma Investment Advisors, LLC Website and will be entering the Charles Schwab & Co., Inc. ("Schwab") Website. Schwab is a registered broker-dealer, and is not affiliated with Jemma Investment Advisors, LLC, or any advisor(s) whose name(s) appears on this Website. Jemma Investment Advisors, LLC is independently owned and operated. Schwab neither endorses nor recommends Jemma Investment Advisors, LLC. Regardless of any referral or recommendation, Schwab does not endorse or recommend the investment strategy of any advisor. Schwab has agreements with Jemma Investment Advisors, LLC under which Schwab provides Jemma Investment Advisors, LLC with services related to your account. Schwab does not review the Jemma Investment Advisors, LLC Website, and makes no representation regarding the content of the Website. The information contained in the Jemma Investment Advisors, LLC Website should not be considered to be either a recommendation by Schwab or a solicitation of any offer to purchase or sell any securities.
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