WEST PALM BEACH, Fla. — Many parents might be hesitant to put money away into a savings plan that can only be used for qualified higher education expenses.
But starting next year, big changes are coming to 529 college savings plans.
Parents want to plan for their children's futures and saving for college early is part of that plan, but many college savings plans are restrictive. The new Secure 2.0 Act, which was recently passed by Congress, offers a future with financial freedom.
George Gonzalez's daughter is only 3 years old, but he's already thinking about how he's going to pay for her college education.
"Yes, often, because of these times that we have now and just uncertainty of how the future is going to be for our children," Gonzalez said.
He's enrolled his children in a 529 education savings plan through his employer.
"It worked out beautifully," Gonzalez said. "It comes out of my paycheck."
The problem with 529 plans is that while you can save money tax-free, it can only be used penalty-free for qualified educational expenses. However, changes are coming next year.
The Secure 2.0 Act now allows excess funds in 529 plans to convert into Roth IRA savings for your child.
"As a parent, if you're looking at a kindergartner, you're saying, 'I have no idea what they're going to want to do. I don't even know if they're going to want to go to school in Florida,'" Shannon Smith, the spokeswoman for the Florida Prepaid College Savings Plan, said. "We love that it doesn't really matter what the scenario ends up being because there are options."
Smith said they offer 529 plans along with prepaid tuition plans.
"The way the prepaid plans work is when you purchase your plan you are locking in at today's prices, future college tuition, so it essentially makes your tuition inflation-free," Smith said.
There are many ways to save and picking the right one for your family is very important.
"You know, not all kids do well in school. Kids are entrepreneurs, artists," Gonzalez said. “Now, there are so many options. … The sky is the limit."
For parents interested in prepaid plans, the open enrollment for Florida prepaid college savings plans opens Feb. 1.