529 Plan Transfers to ROTH IRA

[tbm5690]

I somehow missed this recent change allowing penalty and tax free rollovers, but this is a good move IMO. My kiddo is only 4 so hopefully this is still a thing in 15 or so years when I can open a ROTH for him, and hopefully they don't take away the ROTH option before then either lol. Anyone planning on taking advantage of unused 529 funds in this way?

 

[Ride_Red]

Seems like a good idea. I was just looking into this for grandkids (as grandparent owned 529 plans do not count against the kiddo on their FASFA). There are some rules on when and how much you can roll over per year.
You can also open a 529 for yourself and might be able to roll that in 15 years for yourself if you don't use it for education (I think).

Start a 529 now. It was a useful tool to help with my kids' college expenses.

https://investor.vanguard.com/inves...an open a 529,used for student loan repayment.

From the Vanguard link above:
With SECURE 2.0, unused 529 funds can be used for retirement too. Account owners can incrementally roll over a lifetime maximum of $35,000 (following annual rollover limits) tax- and penalty-free to a Roth IRA for the beneficiary.1

It reads like the 529 funds can roll over, or you can contribute to a ROTH, but only up to the annual limit.

 

[tbm5690]

Seems like a good idea. I was just looking into this for grandkids (as grandparent owned 529 plans do not count against the kiddo on their FASFA). There are some rules on when and how much you can roll over per year.
You can also open a 529 for yourself and might be able to roll that in 15 years for yourself if you don't use it for education (I think).

Interesting, I suppose this would be a work-around for IRA limits.

Start a 529 now. It was a useful tool to help with my kids' college expenses.

I tried when he was in the womb until I realized I needed his SS#

It reads like the 529 funds can roll over, or you can contribute to a ROTH, but only up to the annual limit.

Correct, so depending on what is left transferring to a ROTH would take a few years.

 

[Ride_Red]

Interesting, I suppose this would be a work-around for IRA limits.


I tried when he was in the womb until I realized I needed his SS#


Correct, so depending on what is left transferring to a ROTH would take a few years.

You should be able to open a 529 plan for yourself. Then, when he is born and has a SSN, you can change the beneficiary to him. At least in Michigan, it is that simple.

 

[TiGeo]

Yes. My middle son isn't going to college so instead I'll roll his 529 to a Roth.

 

[RhondaHonda]

Too bad it’s capped at $35,000 but it’s better than nothing. They’ll need earned income to roll over into the ROTH each year but I plan on starting that as soon as the accounts are open 15 years and the kids have some income.

 

[spasm3]

Too bad it’s capped at $35,000 but it’s better than nothing. They’ll need earned income to roll over into the ROTH each year but I plan on starting that as soon as the accounts are open 15 years and the kids have some income.

The transfer is capped? Is that per year?

 

[RhondaHonda]

@spasm3 That’s total per 529 account beneficiary. The annual limit is currently $7,000 so you’d have to transfer it over 5 years.

 

[Ride_Red]

The 529 to Roth roll over transfer is considered part of your annual contribution and is subject to annual contribution limits.

 

[thastinger]

I thought it was limited to 30K? Meaning that if your kid has 529 money left at the end of school up to 30K could be rolled to a 401K that is in their name.