New Law Allows NC 529 Funds to be Used Tax-Free for Retirement

FOR IMMEDIATE RELEASE

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Mary Lindsaye Boyd 
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New Roth IRA rollover rule creates wealth transfer opportunity for North Carolina families

RALEIGH, N.C. – (March 8, 2023) – Families can now save for college and retirement at the same time with the NC 529 Plan, North Carolina’s National Education Savings Program. Starting in 2024, excess NC 529 funds can be rolled over tax-free into a Roth IRA for the beneficiary, thanks to a provision in the SECURE 2.0 Act.

NC 529 accounts are powerful tax-advantaged tools for parents, grandparents, and others to help save for a child’s education. An important benefit of the NC 529 Plan is that funds grow tax-free when the money is used to pay for educational expenses, such as K–12 tuition, college expenses, apprenticeships, and more. The ability to roll over any unused funds to the beneficiary’s Roth IRA is another exciting benefit of saving with the NC 529 Plan.

“The new rule allows North Carolina families to take advantage of tax-free earnings more than ever before,” said Matthew Patrick, a senior manager at CAPTRUST. “Prior to this rule, there were concerns that 529 accounts could be too restrictive if all the funds weren’t used for education. The ability to save for education and retirement should put parents at ease and provide more time to plan for education and what comes after.”

The rollovers are tax-free and not subject to the Roth IRA income limits set on individuals and couples. The new benefit does come with some rules:

• The 529 account must be opened for at least 15 years, and rolled-over funds must have been in the account for at least five years.
• Funds must be transferred to the beneficiary’s Roth IRA.
• A lifetime maximum of $35,000 can be rolled over from a 529 to the beneficiary’s Roth IRA.
• Rollover contributions apply toward yearly max contributions ($6,500 for 2023).

“This is a game-changer for families who haven’t yet opened an NC 529 Account,” said Laura Morgan, Vice President of Communications, Savings, and Legal Affairs at College Foundation, Inc. (CFI). “Knowing that your child can use the funds for a myriad of education expenses, and now that any unused funds will kick-start their retirement should give great comfort to our hardworking parents who want to ensure that the funds they invest are paving the way for their child’s future — no matter what they may choose to do.”

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About North Carolina’s National College Savings Program (NC 529) 
The NC 529 Plan is one of the family of services provided by College Foundation of North Carolina (CFNC) to help North Carolinians plan, apply, and pay for college. The NC 529 Plan is a program of the State of North Carolina, established and maintained by the North Carolina State Education Assistance Authority to meet the requirements of a qualified tuition program under federal tax law; the program is administered by College Foundation, Inc.

To learn more about North Carolina’s National College Savings Program, its investment objectives, risks, and costs, read the Program Description available at CFNC.org/NC529 or call 800-600-3453 toll-free to request. Non-North Carolinians should check with their home state about tax or other benefits associated with investing in its own qualified tuition plan.