Unlocking the Potential: The New Flexibility of 529 Plans

In 2024, beneficiaries can convert unused money in 529 Plans to ROTH IRA dollars. We are very excited about this as it allows younger workers to get a head start on retirement saving! This is in addition to Congress legislating many more flexible ways to use 529 dollars. For more information, see the article below.

529 plans are a great way to save for your child’s education. They offer tax benefits and opportunities for investment growth. New laws allow more ways to use funds in these accounts, bringing flexibility and change to how money can be spent. 529 plans are now more versatile and powerful, helping with a wider range of educational needs and more.

Historically, people primarily used 529 plans for qualified higher education expenses, including tuition, fees, books, and room and board at eligible institutions. Thanks to the Consolidated Appropriations Act of 2021, 529 plans now have more flexibility. This provides more options for how to use the funds while still maintaining expenses as central to the plan’s purpose.

Ways to Utilize 529 Plan Funds

  1. K-12 Education Expenses: One of the most notable changes is the expansion of qualified expenses to include K-12 education. Under the new law, families can use 529 plan money to pay for tuition at elementary, middle, or high schools. Each student can use a maximum of $10,000 per year. This rule allows parents to use money for private school or other educational costs for their children before college.
  2. Apprenticeship Programs: The new rules now permit 529 plan funds to cover costs for vocational training and apprenticeship programs. Employers acknowledge these programs for preparing students for careers. This includes costs such as fees, books, supplies, and required equipment. It provides various opportunities for individuals to secure employment by utilizing their education funds.
  3. Student Loan Repayment: Another significant enhancement is the inclusion of student loan repayments as qualified expenses. Account holders can now use 529 plan funds to pay off student loans. The maximum amount that can be used per beneficiary is $10,000. This amount covers both the principal and interest of the student loans. This provision offers relief to graduates burdened by student debt and provides families with a strategic option to manage educational expenses post-graduation.
  4. Expanded Eligibility for Special Needs Beneficiaries: More people can now benefit from 529 plans, including those with disabilities. The new law expands eligibility for special needs beneficiaries to help meet their financial needs. Now, more services and resources are covered as qualified expenses for special needs beneficiaries. This includes technology, therapies, and other disability-related costs.

These new rules give families more options for using 529 plan money and show how education and job training are changing. Policymakers have helped families make better decisions about saving for education by understanding their different paths and financial struggles. It’s important to note that while the flexibility of 529 plans has increased, prudent financial planning remains paramount. Account holders should consider their personal situation, taxes, and future goals before deciding on their 529 plan funds.

Account holders must consider how their choices will impact their financial situation. They should also consider any tax implications that may arise from using the money in their 529 plans. Additionally, account holders should align their decisions with their long-term goals and objectives.

In summary, 529 plans now offer more flexibility for saving for education and meeting the changing needs of families and students. 529 plans can help you save for education expenses, whether it’s for college, K-12, vocational training, or paying off student loans. They offer a flexible way to reach your educational and financial goals. Families can use 529 plans to help pay for education costs. This can help them save money for the future and make sure their children have a better education.

To learn more about 529 plans and other options to plan for your family’s future, contact Brock.

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Investor’s Resource, a greater Huntsville Alabama financial advisor, delivers expertise in family planning, including portfolio management, retirement planning, and risk management.

Securities offered by Registered Representatives through Private Client Services, Member FINRA/SIPC. Advisory Services offered by Investment Advisory Representatives of RFG Advisory, LLC., a registered investment advisor.  Private Client Services, Investor’s Resource and RFG Advisory are unaffiliated entities.