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A bipartisan bill introduced in the Senate Tuesday would allow families to transfer unused funding from college savings accounts, or 529 accounts, without being penalized.
These accounts allow families to save for their children’s educations by investing after-tax income into mutual funds, much like a Roth retirement savings account. Under current law, families whose children decide not to go to college or do not use all of the savings in the account are penalized for withdrawing any unused funds.
“We should encourage parents to save for their family’s future, while recognizing that they can’t always predict what the future holds. Their child might not decide to pursue a higher education,” said a sponsor of the bill, Senator Richard Burr, a Republican from North Carolina and ranking member of the Senate Health, Education, Labor and Pensions Committee.
The College Savings and Recovery Act, also sponsored by Bob Casey, the Democrat from Pennsylvania, would eliminate these penalties and allow families to transfer funding in 529 accounts to a Roth IRA, where the money can be saved for their child’s retirement.
“An early start on saving for retirement can mean the difference between peace of mind and insecurity for retired Americans,” said Casey about the bill.
The bill was previously included in Burr’s 2017 Boost Savings for College Act.
