Saving for college is something you can never start thinking about too early. And now, with new rules for 529 Plans, it's even easier.
"Whether it's for college or trade school, it can be for room and board, it can be for computers, books, etc. So, we put money into a 529 Plan, and it grows without taxes, and we can take it out without taxes as long as we use a qualified expense," said Roger Reynolds, CEO of Reynolds Financial Group.
Starting in 2024, parents and even grandparents can take advantage of a special allowance of distributions into Roth IRA accounts.
"You're able to now convert up to 35,000 dollars from the 529 Plan into a Roth IRA, which is an amazing opportunity."
That means unused college savings can be transferred to a beneficiary's retirement savings without taxes or penalties. The benefits can multiply quickly, becoming monumental for families.
"The state of Colorado has some very high limits on how much we can have total contributed – that's half a million dollars. So, you can go to the high-level schools if you really want," Reynolds continued. "But you have to be careful with the gift tax limit, which is $17,000 a year, which can build up and build up."
There are some other limitations as well. For instance, the account must be 15 years old.
"And if we put money into a 529 and take it out and spend it on non-qualified educational expenses there will be taxes and penalties," said Reynolds.
The bottom line: If you're curious, simply look into it. "You can start a 529 Plan as early as you want," he assured.
You can do that by clicking here.
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