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SECURE Act: More Flexibility for 529s

By Portage County Business Council

By LouAnn Schulfer, AWMA®, AIF®
Accredited Wealth Management AdvisorSM
Accredited Investment Fiduciary®

The Setting Every Community Up for Retirement Enhancement Act of 2019 was signed into law by President Trump on 12/20/2019 and most rules took effect on 01/01/2020.  This Act was the most substantial piece of legislation passed in over a decade for retirement savers and people working toward financial security.

Among other things, the Act offers more flexibility for qualified tuition plans, authorized by Section 529 of the Internal Revenue Code.  These tax-advantaged plans are designed to encourage saving for future education costs.  Two people immediately came to mind when I read the changes:  a friend of my youngest son who is pursuing an apprenticeship program as an electrician, and the daughter of a friend who withdrew money from her 529 a couple of years ago to pay off student loans.  In both of those situations, prior to the Act, withdrawing money from a 529 would have resulted in taxation and a 10% federal penalty on the earnings portion for a non-qualified distribution (since 529’s are administered by states, each has their own set of rules regarding taxation and potential penalties).  Now, with the new law, expenses for apprenticeships including books, supplies, equipment and fees required for participation are allowed.  The Act also allows up to a $10,000 lifetime maximum per beneficiary (principal and interest) to be withdrawn as a qualified expense, resulting in a tax and penalty free distribution from the account.  This is great news, since 529s are generally put in place by a loved one, such as a parent or grandparent using their hard-earned money to save for the future success of a young person.

According to the Ways and Means Committee, the legislation “expands 529 education savings accounts to cover costs associated with registered apprenticeships; homeschooling; up to $10,000 of qualified student loan repayments (including those for siblings); and private elementary, secondary, or religious schools.”  (1)

If you’ve saved into, or are the beneficiary of a 529, you now have more options for using the money, thanks to the SECURE Act of 2019.  Be sure to consult your tax professional for guidance specific to your situation.

LouAnn Schulfer is co-owner of Schulfer & Associates, LLC Wealth Management and can be reached at (715) 343-9600 or

Securities and advisory services offered through LPL Financial, a Registered Investment Advisor.  Member FINRA/SIPC.