When should I start saving for college?

When saving for college parents often consider a 529 plan. You contribute funds every year and the growth is protected from capital gains taxation. If and when your kids go to college those funds may be used for that purpose. But what if they receive a full ride scholarship or don’t use all the funds? In the past, 529 rules said you needed to pay taxes and a 10% penalty on earnings. But the 2022 rules from the SECURE Act 2.0 have changed things.

If you start saving in a 529 early, at least 15 years prior to finishing college, you can rollover funds to a Roth IRA without taxes or penalties. Of course, if you opened the account closer to college enrollment you can still use the funds for college or take out the funds w/ 10% penalty on earnings. Sound confusing? Don’t take my explanation to your guide financial decisions. The details are spelled out more clearly here: https://www.journalofaccountancy.com/news/2023/mar/saving-college-new-529-to-roth-irs-transfer-rule.html