The 529 Plan Isn't A College Account

Chances are you think a 529 college account is an account that you use to save up for your kids college. Recently there's been some laws that have passed that have completely changed how you can use a 529 plan. Previously you would put money into a 529 plan and all the money in that account could be used tax free for college. But now you can actually roll over $35,000 from your 529 plan into a Roth IRA. That might not seem like a big deal. You did this at 18, but by the time they retire at 65, it would be worth $6 million. That's just if you take this money and invest in S&P 500 index funds. A granted this is worth $1.5 million today, but basically you can use that money to completely pay for kids retirement. Get to $35,000? All you need to put in $52 a month from the ages of 0 to 18. But let's say that you invest $75 a month into your kids 529 plan. At 18, they'd have $50,000. That means that even after rolled over $35,000 to their Roth, they still have $15,000 in that account. Additionally, what's special about the 529 is you can change the beneficiary, meaning that if your kid has four kids by the time these kids turn 18, assuming that your kid had these kids before they turned 36, this $15,000 will turn into $700,000 that they could all roll over $35,000 into a Roth IRA. Essentially you could use a 529 plan to create generational wealth for your family for about $52 a month.