A bipartisan bill raised in the Senate on Tuesday would allow families to transfer unused funds from college savings accounts or 529 accounts without penalizing them.
These accounts allow families to save for their children’s education by investing after-tax income in mutual funds, much like Roth leisure savings accounts. Under current law, children of families who decide not to go to college or do not use all the savings in the account are punishable for withdrawing unused funds.
“Our parents should be encouraged to save for their family’s future when they admit that they cannot always predict what the future holds. Their children may not decide to pursue higher education, ”said Richard Barr, a Republican senator from North Carolina and a ranking member of the Senate Health, Education, Labor and Pensions Committee.
The College Savings and Recovery Act, also sponsored by Pennsylvania Democrat Bob Casey, will remove these penalties and allow families to transfer funds to Roth IRA in 529 accounts, where money can be saved for their child’s retirement.
“An early start to saving for retirement could mean the difference between peace of mind and insecurity for retired Americans,” Casey said of the bill.
The bill was previously included in Burr’s 2017 Boost Savings for Colleges Act.