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Weekly Market Update June 16, 2023

June 16, 2023

Weekly Market Update - 6/16/23

Dow Jones Industrial 34,299 +1.2%, S&P 500 4,410 +2.6%
Nasdaq Composite 13,690 +3.2%, US Ten Year 3.76%, Crude Oil $71.88 

Let's Talk About the Kids...Calling All 529 Plan Owners - More Reasons to Contribute, More Reasons to Start

529 Plans have become a staple for those seeking to help their children or grandchildren fund their future college education, and in some cases pre-college qualified education expenses.  Any interest, dividends or capital gains earned while in the 529 account are exempt from taxation, as long as the funds from the 529 account are used for qualified educational expenses of the beneficiary. 

One of the many concerns against opening a 529 Plan for very young children and/or continuing to fund 529 plans once their value becomes sizable, is that any remaining funds from a 529 that aren’t used for education expenses face a 10% penalty along with regular income taxes.  There is often fear of over-funding a 529 account for a child, especially if the child may not: 1) Go to college or 2)  Use the full amount of the account for the university they attend.  There’s good news for those wrestling with those concerns.

Starting in 2024, new rules will allow some excess amounts in a 529 account not used for educational purposes to be rolled over into a Roth IRA account for the beneficiary.  Section 126 of the SECURE 2.0 act of 2022 introduced a rule that allows for distributions from 529 Plans to the beneficiary in a tax-free and penalty-free transfer.  The details behind this rule are summarized below:

  1. The maximum amount a beneficiary can transfer from their 529 to their Roth IRA account is $35,000.
  2. The transfers are subject to the annual Roth IRA contribution limits (currently $6,500/year- but there is no upper income constraint)
  3. The 529 account must have existed for 15 years
  4. No contributions from the last 5 years can be transferred


To see a few examples of how this transfer could work in real-life situations, attached is an article from the Journal of Accountancy HERE.


To illustrate the tax benefits of using a 529 plan vs a regular brokerage account to fund a child’s education, take the following example: (source:,, my calculator…)

A one-year old child, attending a four-year public-in state university (average national tuition currently ~$28,000) will have a future cost of ~$276,000 by 2040 to pay for 100% of their college tuition.  In order to meet this need using a regular brokerage account, you would need to save $680/month for 21 years (21 because of an assumed 4-year college).  If using a 529 account, you would need to save $598/month for 21 years.   Said another way, in today’s dollars, the cost of college in using a brokerage account to fund this child’s tuition would cost $100,581.  The cost using a 529 account in today’s dollars would be $78,847.  And, of course, this is assuming an in-state public school – the numbers are amplified in using out-of-state or private schools. 

The chart below shows the SIZE of an account assuming a monthly savings/contribution rate of $680/month – the orange bar is the 529 account; the green the regular brokerage account.

Anyone who has children or grandchildren approaching college is aware of the rising cost of education.  Because of this, it is imperative that to take advantage of every tax-benefit the government offers.  But simply opening a 529 and “setting it and forgetting it” is not enough.  Making sure your childrens’/grandchildren’s investment allocations are constructed in a way that will maximize the value of their plan will help to minimize any potential future debt burden they may have.  This is where M&R can help – we can now work directly with you to help you manage your childrens’/grandchildrens’ 529 accounts directly, all without moving the account from where it currently resides.  If you are willing to seek professional help to manage your personal retirement accounts or individual brokerage accounts, it only makes sense to do the same for your kids or grandkids.  After all, they are the future!


Please reach out to us to hear how we can help you maximize this type of investment for your future generations.  To set up a call to discuss further, click HERE.


 Have a great weekend,