In this third video in a series on the Secure Act 2.0, Paul discusses the intergenerational benefits of the new 529 rule….(read more)

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The Secure Act 2.0, proposed by House Ways and Means Committee Chairman Richard E. Neal, could result in big changes to 529 education savings plans and Roth IRA rollovers. The legislation is intended to encourage workers to save more for retirement and would bring about significant changes to current retirement savings options.

One of the most significant changes proposed by the Secure Act 2.0 relates to the 529 education savings plan. Currently, these plans allow families to save for their children’s college education tax-free. However, under the proposed legislation, families would be able to use 529 savings to pay for apprenticeships, homeschooling, and private elementary, middle, and high school tuition.

This change is significant because it would expand the range of expenses that 529 plans can cover. Parents who choose to send their children to private schools or alternative education programs would have more options for funding their education.

The Secure Act 2.0 would also impact Roth IRA rollovers. Currently, individuals can rollover funds from other retirement accounts into a Roth IRA, which allows them to pay taxes on the funds upfront, rather than when they withdraw the money in retirement. However, the Secure Act 2.0 would allow individuals to convert traditional 401(k) accounts into Roth accounts while still employed.

This change could be beneficial for individuals who expect to be in a higher tax bracket in retirement. By converting their accounts now, they can pay taxes on their retirement funds at their current tax rate, rather than waiting until they retire and potentially being subject to a higher tax rate.

The Secure Act 2.0 proposes other changes as well, including increasing the age for required minimum distributions from retirement accounts from 72 to 75 and expanding access to multiple-employer plans, which allow small businesses to band together to offer 401(k) plans to their employees.

Overall, the Secure Act 2.0 could result in significant changes to retirement savings options, from expanding the use of 529 plans to allowing for increased Roth IRA rollovers. The proposed changes could be beneficial for families looking to fund their children’s education or individuals seeking to save more for retirement.