529 to Roth Transfers
Starting in 2024, eligible 529 Account funds can be rolled over tax free into a Roth IRA. The provision is included in a $1.7 trillion dollar government funding package.
What’s the big deal?
Leftover money originally intended for a child’s education can now go toward retirement savings with no penalties or tax bills via a Roth IRA, which offer tax-free growth and withdrawals.
Currently, such a move would be subject to income tax and a 10% penalty.
- $35,000 lifetime transfer Limit
- Subject to Max annual Roth contribution limit.
- The rollover can only be made to the beneficiary’s Roth IRA — not that of the account owner. (In other words, a 529 owned by a parent with the child as beneficiary would need to be rolled into the child’s IRA, not the parent’s.)
- 529 Must have been open for 15 years. Changing beneficiaries may reset the 15-year clock.
- Accountholders can’t roll over contributions, or earnings on those contributions, made in the last five years.
Again, keep in mind this doesn’t go into effect until 2024, however, it’s never too early to plan ahead. If you have any questions, feel free to reach out to us, we’d love to help.
A 529 plan is a college savings plan that allows individuals to save for college on a tax-advantaged basis. Every state offers at least one 529 plan. Before buying a 529 plan, you should inquire about the particular plan and its fees and expenses. You should also consider that certain states offer tax benefits and fee savings to in-state residents. Whether a state tax deduction and/or application fee savings are available depends on your state of residence. For tax advice, consult your tax professional. Non-qualifying distribution earnings are taxable and subject to a 10% tax penalty.
This material is for informational purposes only and is not investment, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction. Triad Advisors, LLC does not provide tax or legal advice.