The SECURE 2.0 Act, which was signed into law on Dec. 29, introduced a number of changes to retirement savings. One in particular is relevant to parents struggling with whether to save for college or retirement: SECURE 2.0 allows excess 529 funds to be rolled over to a Roth IRA tax- and penalty-free, beginning in 2024.

This isn't a blanket authorization to use your 529 to build up Roth savings, although it does waive the income limits for Roth contributions made via 529. The Act limits 529-to-Roth rollovers to a maximum of $35,000 per beneficiary over their lifetime, and contributions must be within the annual contribution limit. So, how does that work? Let's say a 529 has $25,000 excess, and the beneficiary is less than 50 years old. The current annual Roth IRA contribution limit is $6,500 for those under age 50 ($7,500 for those 50 and older). The 529 beneficiary could transfer $6,500 from the 529 to their Roth IRA annually until all $25,000 was moved.

In order to qualify for this tax- and penalty-free rollover, the 529 account must have been open for 15 years, and no contributions or earnings made in the previous five years are eligible for rollover.

There's one big catch for parents trying to balance retirement and college savings, which hopefully will be resolved between now and 2024, when these rollovers become available: As written, the law only allows the beneficiary of the 529 to roll over the excess into their own Roth IRA, and the language indicates that changing the beneficiary on the 529 restarts the 15 year clock. The language in the SECURE 2.0 Act's summary document seems to support the idea that these rollovers should be eligible for parents as well: "Families and students have concerns about leftover funds being trapped in 529 accounts unless they take a non-qualified withdrawal and assume a penalty. This has led to hesitating, delaying, or declining to fund 529s to levels needed to pay for the rising costs of education. Section 126 eliminates this concern by providing families and students with the option to avoid the penalty, resulting in families putting more into their 529 account."

Parents wanting to balance these competing priorities— not knowing whether the beneficiary issue will be updated— have some choices:

• Parents with very young children could open a second 529 account intended for the student, but with one or the other parent named as beneficiary. Should the student ultimately not need the funds, the excess is already in the parent's name and thus eligible for a rollover to the parent's Roth IRA. The parent could make Roth IRA rollovers up to the amount not needed-- or the $35,000 cap-- and then change the beneficiary to the student for educational expenses. Parents would want a second 529 in the student's name to use for the initial college years in order to allow the parents sufficient time to make Roth IRA rollovers.

• Use a taxable account for some portion of college savings, assuming that any surplus not used for college could be used for retirement, including by transferring portions to a Roth IRA annually.

• Should the 529 be overfunded, plan for annual withdrawals during the college years that maximize tax-free distributions based on the student having limited income to begin with. If the 529 is overfunded due to scholarships, the 10% penalty doesn't apply, and students who are dependents on their parents' tax return get a standard deduction of earned income (up to the regular standard deduction) plus $400-- meaning that at least $400 of gain in the account would be tax-free every year, with additional gain taxed at the student's marginal tax rate. These funds can then be moved to the parent’s retirement savings.

Remember that the penalty for a nonqualified (not for tuition, fees, room and board, books or required supplies) 529 distribution only applies to the growth in the account, not the contributions, though some states require a clawback of state tax benefits. And the penalty is assessed to whomever receives the distribution: the student if it's sent to the student or to the college, or the parent if it's sent to the parent.