Families are increasingly turning toward 529 plans to help their children build savings for their futures.
These plans offer families with a means to cultivate tax-advantaged savings for their children. In turn, these savings can be used to help cover the costs of higher education expenses, including trade schools and college.
Demand for these strategies are continuing to mount. Recently, the College Savings Plans Network found that over $508 billion has been invested in 509 plans across the country, as of June 30, 2024. This marks an astounding gain of over $35 billion since June 30, 2023.
Looking at what has recently happened to 529 plans makes it clear why families are increasingly pivoting to them. Earlier this year, Congress started allowing owners of 529 plans to take advantage of their overfunded 529 accounts.
Since the beginning of 2024, families with an overcrowded 529 account can pivot up to $35 thousand toward a Roth IRA. In the past, families had far more limited options to take advantage of bulked-up 529 savings. This new allowance enables families to further leverage a 529 plan’s tax-efficient growth to get a head start on a Roth IRA.
With 529 plans creating opportunities for saving beyond higher education, it’s no mystery why families continue to pump money into these strategies. And with the exorbitant price of higher education looming over families across the country, the trajectory for 529 plans shouldn’t be changing any time soon.