A 529 account can be a useful addition to save for your child's college education. Starting next year, there's some 529 flexibility that could be a retirement boost as well.

529 plans are tax-advantaged savings accounts specifically geared to saving for college and will soon have a new Roth IRA transfer option.

What You Need To Know

  • Here's what you need to know about the new 529-to-Roth rollover option:

  • The provision takes effect in 2024

  • The 529 plan must be open for at least 15 years

  • The lifetime limit for the rollover is $35,000 per beneficiary

  • The Roth IRA must be in the name of the beneficiary of the 529 plan

  • Any contributions made within the past five years are ineligible to be moved into the Roth IRA

When Rob Anania's first of four children was born, a 529 plan was opened and another three after that to save money for college.

“We put money in it over the years and you know thank God for that,” Anania said. “With the cost of college today I don’t know how we would be able to afford it without having done that.”

Let's say Anania's youngest decides not to go to college or gets a scholarship, he can now jump-start her retirement savings with the new 529 plan rollover provision.

The accounting and tax experts at MMB+Co explained that starting in 2024 under a new federal law, you'll be able to convert that 529 to a Roth IRA. Essentially it allows unused college savings to be transferred to that beneficiary's retirement savings without taxes or penalties.

“I think this is going to really be helpful to a lot of families,” said Jim Schnell, CPA/ABV at MMB+Co. “The program started in 1996. It's starting to get the first full generation of families that had multiple beneficiary options or siblings, but now they are done and their kids are all done with school. They may have some money left in the program. Unused funds in a 529 will be eligible for that beneficiary to convert to a Roth IRA. It's going to be helpful."

There are some 529 to Roth IRA transfer limits that include $6,500 a year with a cap of $35,000. The 529 plan must be held for the designated beneficiary for at least 15 years. The new provision is part of the SECURE 2.0 Act, passed by Congress at the end of 2022 which overhauled parts of the American retirement system.

MMB+Co and its team of business advisors and CPAs has offices in Rochester, Elmira, Canandaigua, Latham and Queensbury.