New Illinois law allows families to roll over 529 funds into Roth IRAs
CHICAGO - Illinois families now have a new option and incentive for their child’s college savings plan.
Illinois offers the Bright Start and Bright Directions college savings programs, allowing parents to set aside money for their child’s educational future.
But what if their child doesn’t go to college, or they have leftover funds?
Thanks to a new law, parents who don’t use all the money in their Illinois 529 accounts can now roll over up to $35,000 into a Roth IRA for their child’s retirement savings.
The recently signed law provides parents with an additional option for the money saved for their children.
This is beneficial if the child doesn’t use all the funds, doesn’t attend college, or receives a scholarship instead.
The state believes this serves a dual purpose: it incentivizes parents to save without worrying that the money is locked in for a specific cause, and it encourages children to pursue higher education.
It’s important to note that the money will only roll over into a Roth IRA for the beneficiary of the 529.
The state treasurer also announced that Illinois will soon be changing its investment manager, which will result in new, easier-to-use technology and lower fees for families, with an additional 13% reduction in costs.