College savings tax deductions

What happened: A one-time $3,000 tax refund invested in a 529 plan could grow to about $12,000 in 18 years at an 8% annual return, highlighting the power of compounding in college savings. Meanwhile, higher earners are encouraged to consider Roth IRA conversions in their pre-retirement years to potentially benefit from tax-free withdrawals in retirement. However, they should be mindful of potential tax implications on Social Security and Medicare.

Market impact: The 529 plan industry benefits from increased awareness and usage, driving growth in educational savings. Financial advisors may see an uptick in clients seeking Roth IRA conversion strategies, potentially boosting their services. States offering 529 plan tax deductions may see increased participation, benefiting their budgets.

What to watch next: The upcoming tax filing deadline will reveal the extent of 529 plan usage and Roth IRA conversions. Additionally, changes in state tax laws regarding 529 plans and Roth IRAs will impact future savings strategies.