Bill Overview
Title: College Savings Recovery Act.
Description: This bill sets forth a special tax rule allowing a rollover to a Roth Individual Retirement Account (Roth IRA) from a long-term qualified tuition program (i.e., a 529 qualified tuition program) without penalty.
Sponsors: Sen. Burr, Richard [R-NC]
Target Audience
Population: People with 529 plan accounts
Estimated Size: 50000000
- 529 plans are widely used by Americans to save for college expenses due to tax advantages.
- There are 14 million 529 accounts in the United States with billions of dollars in assets.
- Roth IRAs are popular retirement savings vehicles due to their tax-free growth and withdrawal advantages in retirement.
- The ability to rollover 529 plan funds to a Roth IRA may benefit account holders who have excess funds in their 529 plan, e.g., due to a child not attending college or receiving scholarships.
Reasoning
- The policy could significantly impact those with excess funds in their 529 accounts, particularly those whose children have completed education with leftover funds.
- Retirement-oriented individuals might appreciate the flexibility without incurring penalties.
- Common households without extra funds in their 529 plans might not feel a strong impact as they may not use this rollover opportunity.
- The policy targets a specific subset of the population, so commonness ratings will vary.
- The budget limits will restrict how many can convert funds initially, likely affecting those with higher existing balances first.
Simulated Interviews
Financial Planner (New York, NY)
Age: 45 | Gender: female
Wellbeing Before Policy: 7
Duration of Impact: 5.0 years
Commonness: 4/20
Statement of Opinion:
- This policy is great for flexibility. Now I can use my 529 savings for retirement without penalties.
- It supports families with changing educational plans dramatically.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 8 | 7 |
| Year 2 | 8 | 7 |
| Year 3 | 8 | 7 |
| Year 5 | 8 | 7 |
| Year 10 | 7 | 7 |
| Year 20 | 6 | 7 |
Software Engineer (San Francisco, CA)
Age: 50 | Gender: male
Wellbeing Before Policy: 6
Duration of Impact: 10.0 years
Commonness: 2/20
Statement of Opinion:
- The ability to roll over to a Roth IRA makes my parents' gift more valuable for retirement.
- Without kids, this policy allows me to redirect those funds effectively.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 6 |
| Year 2 | 8 | 6 |
| Year 3 | 8 | 6 |
| Year 5 | 8 | 6 |
| Year 10 | 9 | 6 |
| Year 20 | 9 | 6 |
High School Teacher (Austin, TX)
Age: 38 | Gender: female
Wellbeing Before Policy: 5
Duration of Impact: 5.0 years
Commonness: 3/20
Statement of Opinion:
- This helps families like mine, who thought their child would attend college.
- There’s a peace of mind knowing that unused funds can now grow for retirement.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 5 |
| Year 2 | 6 | 5 |
| Year 3 | 6 | 5 |
| Year 5 | 6 | 5 |
| Year 10 | 6 | 5 |
| Year 20 | 5 | 5 |
Retired (Columbus, OH)
Age: 60 | Gender: male
Wellbeing Before Policy: 6
Duration of Impact: 7.0 years
Commonness: 6/20
Statement of Opinion:
- It’s a smart move, especially for us retired folks looking to stretch savings.
- I'd rather not be penalized for transferring savings set for my grandkids.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 6 |
| Year 2 | 7 | 6 |
| Year 3 | 7 | 6 |
| Year 5 | 7 | 6 |
| Year 10 | 8 | 6 |
| Year 20 | 7 | 6 |
Chef (Denver, CO)
Age: 42 | Gender: female
Wellbeing Before Policy: 7
Duration of Impact: 3.0 years
Commonness: 7/20
Statement of Opinion:
- The policy is a safety net, just in case my child doesn't use all the funds.
- It offers a new angle to plan for my future needs.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 7 |
| Year 2 | 7 | 7 |
| Year 3 | 7 | 7 |
| Year 5 | 7 | 7 |
| Year 10 | 8 | 7 |
| Year 20 | 8 | 7 |
Entrepreneur (Miami, FL)
Age: 35 | Gender: male
Wellbeing Before Policy: 7
Duration of Impact: 0.0 years
Commonness: 8/20
Statement of Opinion:
- It doesn’t impact me much as I don’t follow traditional savings path.
- Having the option is nice, but my focus remains on my business investments.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 7 |
| Year 2 | 7 | 7 |
| Year 3 | 7 | 7 |
| Year 5 | 7 | 7 |
| Year 10 | 7 | 7 |
| Year 20 | 7 | 7 |
Graduate Student (Seattle, WA)
Age: 29 | Gender: other
Wellbeing Before Policy: 6
Duration of Impact: 0.0 years
Commonness: 9/20
Statement of Opinion:
- As someone without kids, it might be useful in the future if my plans shift.
- Offers more flexibility in planning long term.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 6 |
| Year 2 | 6 | 6 |
| Year 3 | 6 | 6 |
| Year 5 | 6 | 6 |
| Year 10 | 6 | 6 |
| Year 20 | 6 | 6 |
Doctor (Chicago, IL)
Age: 55 | Gender: female
Wellbeing Before Policy: 8
Duration of Impact: 10.0 years
Commonness: 4/20
Statement of Opinion:
- Keeping any left-over funds for retirement without penalty is a smart move.
- As a higher earner, using Roth is appealing.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 8 | 8 |
| Year 2 | 8 | 8 |
| Year 3 | 9 | 8 |
| Year 5 | 9 | 8 |
| Year 10 | 9 | 8 |
| Year 20 | 9 | 8 |
Content Creator (Los Angeles, CA)
Age: 32 | Gender: male
Wellbeing Before Policy: 7
Duration of Impact: 0.0 years
Commonness: 10/20
Statement of Opinion:
- While it's a clever option, my focus is not on 529 plans.
- The knowledge it's there is reassuring, however for now it's irrelevant.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 7 |
| Year 2 | 7 | 7 |
| Year 3 | 7 | 7 |
| Year 5 | 7 | 7 |
| Year 10 | 7 | 7 |
| Year 20 | 7 | 7 |
Journalist (Boston, MA)
Age: 48 | Gender: female
Wellbeing Before Policy: 5
Duration of Impact: 4.0 years
Commonness: 5/20
Statement of Opinion:
- Glad to have an alternative use for my savings meant for college.
- I won't need to worry about losing money if my child’s plans change.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 5 |
| Year 2 | 6 | 5 |
| Year 3 | 6 | 5 |
| Year 5 | 7 | 6 |
| Year 10 | 7 | 6 |
| Year 20 | 6 | 5 |
Cost Estimates
Year 1: $1000000000 (Low: $500000000, High: $1500000000)
Year 2: $1100000000 (Low: $550000000, High: $1600000000)
Year 3: $1200000000 (Low: $600000000, High: $1700000000)
Year 5: $1300000000 (Low: $650000000, High: $1800000000)
Year 10: $1500000000 (Low: $800000000, High: $2000000000)
Year 100: $5000000000 (Low: $3000000000, High: $7000000000)
Key Considerations
- The impact on tax revenues is dependent on rollover levels from 529 plans to Roth IRAs.
- How widely the policy is adopted will affect long-term revenue forecasts.