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Changes that started with passed in 2022 are now in effect for those with 529 education savings accounts. Now, besides putting aside funds for school expenses, account owners can jumpstart their retirement savings.

Starting Jan. 1, account owners are now able to roll over unused funds to Roth IRA accounts. It鈥檚 an important change for those who had concerns about oversaving for educational purposes, said Greg Dyer, chief compliance officer at , a state agency that manages and provides education on the savings plan.

鈥淐ongress鈥� intent was really to help kickstart the retirement savings for a beneficiary that has gotten through college,鈥� he said, 鈥渁nd doesn鈥檛 need them anymore for college expenses.鈥�

During the first 10 days of the change, there were more than 90 rollovers in Utah, Dyer said. The state has the fourth largest 529 plan in the country with over $21 billion in assets under its management, a fact Dyer attributed to the state鈥檚 low fees in investments and, overall, a good reputation.

529 plans, which got their name from section 529 of Internal Revenue Code, allow people from all over the country 鈥� except for Wyoming 鈥� to save for tuition and other school expenses, such as books, fees, room and board and other K-12 and graduate school expenses in their state鈥檚 plan.

Though there are different kinds of plans, one of the most popular works similarly to a Roth IRA, allowing people to have tax-advantaged savings plans for education purchases.

鈥淵ou don鈥檛 get a federal tax deduction going in, but the funds can compound and grow tax deferred,鈥� Dyer said. 鈥淎nd if you use them for qualified education expenses, then the taxes are waived.鈥�

But, there are some requirements to be able to transfer the funds: Accounts must be over 15 years old and account owners can鈥檛 roll over any funds or earnings that have accrued in the past five years.

鈥淭hose funds can grow but you can鈥檛 put a contribution in last year and then roll over this year,鈥� he said. 鈥淵ou have a five-year kind of wait period.鈥�

The annual amount that users can roll over is limited to the Roth IRA contribution cap, which is typically around $7,000 for all savings sources.

鈥淟et鈥檚 say that you put $5,000 into your regular Roth IRA,鈥� he said, 鈥測ou can only do $2,000 from your 529 plan.鈥�

Then, there鈥檚 also a lifetime limit of $35,000 for these rollover contributions.

is part of States Newsroom, a nonprofit news network supported by grants and a coalition of donors as a 501c(3) public charity. Utah News Dispatch maintains editorial independence. Contact Editor McKenzie Romero for questions: [email protected]. Follow Utah News Dispatch on and .

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