Change the way your people save with new 529 plan flexibility

3 min read

Education and retirement expenses are two of the most significant, universal and intimidating long-term financial goals Americans face today. Target savings goals often total in the hundreds of thousands of dollars and beyond for these two critical life costs.

Yet, some of your people may not know how to adequately save for these goals or may be under utilizing the tools available to them in working toward fully funded education and retirement accounts. Taking full advantage of 401(k)s, both Roth and traditional, as well as education savings accounts like 529 plans gets more complicated when the laws guiding these saving tools are ever changing.

Education expenses in particular can be a major source of stress for U.S. families who face rising college tuition costs and often must turn to student loans to cover items like tuition or room and board. Utilizing a 529 education savings account allows families to save for these expenses while reaping tax benefits, like allowing invested funds to grow tax free. Funds must be used for qualified educational expenses, or else face a 10% penalty on earnings and be subject to income tax.

Until recent years, the items considered qualified expenses were somewhat limited. However, now the list of qualified educational expenses has been expanded to include not just college costs but also private elementary and secondary education tuition, plus a maximum of $10,000 in a 529 can go toward repaying student loan debt.

And the list continues to grow: Starting in 2024, any unused 529 funds can be rolled over into a Roth IRA entirely tax free, thanks to the new spending bill signed into law on Dec. 29.

These changes make 529 education savings accounts all the more attractive – and make it less likely funds placed in these accounts will go unused or fail to receive the full tax benefits.

The financial education nudge offers can help guide your employees through legislative changes, updated contribution limits and implications, like these, as they work toward their unique savings goals. We offer resources including interactive tools to understand how inflation affects your savings, guides to selecting the right investment mix for your 401(k) or IRA, and insights on setting a target emergency fund personalized to your needs.

Want to find out more about nudge’s unique tools and product features? Or are you intrigued to understand the financial health of your workforce? Organize a quick demo of nudge today.