How New Rules Have Potentially Made 529 Plans More Attractive
529 Plans are investment vehicles meant to help fund college education expenses. They allow parents (and others) to contribute to a plan in the name of a child with the intention that the money is used for education expenses in the future. Those dollars can be invested and grow tax free and distributions are tax fee if used for qualified expenses. One of the historical downsides of 529 plans is that if the child does not go to college, then distributions will be subject to income tax and potentially penalties. So one of the challenges parents faced was what if my child doesn’t go to college? The good news is that the rules have changed. Beginning January 1, 2024 unused 529 account funds may be transferred to a Roth IRA in the child’s name with no penalty.