Bill authorizing the transfer of university savings to retirement funds

A bipartisan bill introduced in the Senate on Tuesday would allow families to transfer unused funds from college savings accounts, or 529 accounts, without being penalized.

These accounts allow families to save for their children’s education by investing after-tax income in 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 the savings in the account are penalized for withdrawing unused funds.

“We should encourage parents to save for their family’s future, recognizing that they can’t always predict what the future holds. Their child may not decide to pursue higher education,” said one of the bill’s sponsors, Senator Richard Burr, a Republican from North Carolina and a senior member of the Senate Committee on Health, Education, work and pensions.

The College Savings and Recovery Act, also sponsored by Bob Casey, the Pennsylvania Democrat, would eliminate these penalties and allow families to transfer funds in 529 accounts to a Roth IRA, where the money can be saved for their child’s retirement. .

“Getting started saving for retirement early can mean the difference between peace of mind and insecurity for American retirees,” Casey said of the bill.

The bill was previously included in Burr’s 2017 Boost Savings for College Act.

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