$1.7 Trillion Spending Bill Allows Excess 529 College Funds To Become Retirement Tools

The $1.7 trillion spending bill has allowed the excess in 529 college funds to become retirement tools. This move allowed a better utilization of the funds without the fear of being penalized for any excess, says Lee.

529 College Funds [Photo: Yahoo Finance]

What are the 529 college funds?

The 529 college funds are from education expenses programs sponsored by the state governments. These funds can be used for education expenses like tuition fees for private elementary, high school, and college. These funds increase without taxes. The federal government does not offer tax deductions, but many state governments provide a full or partial tax deduction. There are also no limits to income, age, or yearly contribution for these funds.

However, there are still major limitations outlined for the 529 program. Beneficiaries can transfer up to $35,000 only from their 529 accounts to their Roth IRA during their entire lifetime. Beneficiaries can only change programs twice a year. They can transfer to another state’s 529 program but it can only be done once a year. Only the beneficiaries can transfer funds, and not the account holder such as the parents or grandparents who set up the accounts. The accounts must also have been open for no less than 15 years, as reported by Lee.