01/06/2023
SECURE ACT 2.0
With the passing of the SECURE ACT 2.0, significant changes are coming in the Retirement and Educational planning space, not only now, but in the coming years as well. I’m going to be covering different changes over the next few posts, including some ideas on how to benefit from the changes.
The first focus will be the changes to 529 college savings plans. Many parents ask on a regular basis what happens if there is money left in the plan after school is over, their kids don’t go to school, or they get a scholarship. These 529 plans have provided many flexible options over the years regarding residual money, but this most current change is very impressive. They will allow you to start moving up to $35,000 tax free into a ROTH IRA (still following Roth IRA contributions limits per year). There are a few catches involving plan duration; eligible plans must be in place for 15 yrs and no contributions from the last 5 can move over. The impacts on state’s tax credits/deductions, etc have not yet been announced.
Now you will essentially be able to jump start your kids’ (OR possibly YOUR) retirement with leftover 529 money. Purposely overfunding a 529 is now a new planning option for retirement. Rollovers can start taking place next year. There are a few tweaks that still need to be worked out with the change, but this is a great new option.
On a related note, Indiana recently increased their state tax credit for 529s to 20% of what you put in up to a $1,500 (previously $1,000). Therefore, if you put in $7,500, you can get up to $1,500 tax credit on your Indiana taxes. You can even do this while your kid is using the money in college, trade schools, and private K-12. Many other states have tax benefits as well. Just call me to discuss these.
