Jump Start Saving for Next Generation with 529 to IRA Rollover

More flexibility for unused 529 Plan funds:

A 529 Plan is an investment account that provides tax benefits when used to pay for qualified education expenses. Until recently, 529 Plan owners had limited options for money saved in a 529 Plan that they no longer needed for education expenses. They could transfer the money into another beneficiary’s 529 Plan, or they could take a non-qualified withdrawal, paying both federal income taxes and a 10% penalty on the earnings.  

Thanks to the SECURE Act 2.0, 529 Plan owners now have the option to rollover money from a529 Plan to a Roth IRA in the beneficiary’s name, tax- and penalty-free. This new legislation is great for anybody that has money saved in a 529 Plan that they no longer plan to use for educational purposes, or for anybody who wants to provide their beneficiary with a head start on saving for retirement, making it an excellent option for those looking to repurpose their savings. There are a few specific rules and limitations that you will need to verify to make sure you’re eligible.

What are the rules?

· The beneficiary of the 529 Plan must also be the owner of the Roth IRA, and they must have income at least equal to the amount of the rollover

· The beneficiary’s 529 Plan must have been open for at least15 years

· The eligible rollover amount must have been in the 529 Plan for at least 5 years

· The rollover amount cannot exceed the annual Roth IRA contribution limit (minus any other Traditional or Roth IRA contributions made by the beneficiary that year)

· There’s a $35,000 lifetime cap on Roth IRA rollovers for each 529 Plan beneficiary

· Roth IRA income limitations are waived for 529-to-RothIRA rollovers

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_{Disclosure:
The opinions expressed herein are those of Grand Wealth Management(“GWM”) and are subject to change without notice. This material is not financial advice or an offer to sell any product. This article is for informational purposes only and does not constitute investment, legal or tax advice and should not be used as a substitute for the advice of a professional legal or tax advisor. GWM reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs. This is not a recommendation to buy or sell a particular security. GWM is an independent investment adviser registered under the Investment Advisers Act of1940, as amended. Registration does not imply a certain level of skill or training. More information about GWM including our investment strategies, fees and objectives can be found in our ADV Part 2, which is available upon request.}