This is not a joke. 529 Funds Can Now Be Rolled Over into a Roth IRA… Starting in 2024🫶
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- Опубликовано: 24 фев 2023
- #personalfinance personalfinance #529 #collegeplanning #shorts #secureact2.0
The new Secure Act 2.0 that went into effect on Dec. 31st created the ability for anyone with a 529 Plan to rollover unused funds into a Roth IRA for the beneficiary if a few rules are followed starting in 2024.
Previously, some families were hesitant to fully maximize educational savings in the 529 plan because if too much money was in there, penalties and taxes were levied on any distributions not used for educational purposes.
Not anymore!
And to learn all the important new rules for 529 plans, IRAs, 401ks, 403bs and 457s, watch Colin Exelby, CFP® explain the details in the entire video here:➡️ • New 401K, IRA, 529 Rul...
P.S. Supercharge Your Financial Life with my free ebook, Accelerating your Path Toward Prosperity. celestialwm.com/ptpebook-go/
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Doesnt Blackrock own the 529 investments? Vanguard gets the money that you could put into a savings account at no risk or put into this 529 and risk it all as investments are shady af
Hi Colin, long time subscriber here. Awesome video! I have a question about this topic. In 2008, my daughter was born and I opened both a 529 account and a custodial Roth IRA. I contributed $200/month into the 529 account ever since but I never contributed anything to her Roth IRA since she never had an income. Later this year both the 529 account, Roth IRA and my daughter will become 16 years old, the 529 account has grown to about $135k and the Roth IRA is still at $0. Does this mean I can simply go to my Fidelity account and transfer $7,000 over from the 529 to the Roth IRA? And do it again next year and the year after that until i had transferred $35,000 over?
Great to hear from you! This is a very specific question and as a registered financial advisor, I don't provide personal advice on this channel.
In essence what you are hoping to find is a "backdoor" roth contribution for a minor who doesn't have earned income.
At the current moment, 3/2024 there are still some grey areas in this new tax law. We should have more clarification by April 15, 2025 when funding of a Roth IRA for 2024 is due.
Some key points to follow that we do know...
The beneficiary cannot roll over any money from their 529 plan into a Roth IRA without incurring penalties and taxes unless the account has existed for at least 15 years. And if you changed designated beneficiaries at any point it also will likely restart that 15-year clock. But that isn't confirmed yet either to my knowledge. In your example, the child is just over that age so that likely wouldn't be an issue.
Additionally, you cannot roll over any contributions or earnings on contributions made in the last five years. So presumptively, in the example you provided there would be contributions and earnings attributable prior to that, that would be eligible.
What isn't clear yet is if the beneficiary needs to have earned income to qualify for the opportunity for a rollover.
It is also not clear what impact changing state plans could have on the timetable if you moved plans from one to another.
Further state by state, rules on what a "qualified distribution" is would need to be updated for uniformity.
Lastly, the intent of the statute is for funds REMAINING in a 529 AFTER use for education. In your example, it is moving funds PRIOR to needing to use them and is not the intent of the statute.
For now I would just keep watching for an update to the statute. But it is great news that the 529 can now be rolled over to a Roth IRA to some degree at some point.
Cheers!
@@seetheforestthroughthetrees thanks for the reply, I’m going to go ahead and make her get some earned income so I can start a rollover
Even with earned income, it still may not be possible before funds are used for college. So be prepared for that. But, it may be possible. All depends upon the upcoming clarification during the next 12 months. Glad I could help, and thanks for the great question, and being a part of the community!
Hmmm - interesting game changer! Please post the IRS link.
Here is the Secure Act 2.0 Summary posted by the Senate Finance Committee. Here is the link. Section 126. www.finance.senate.gov/imo/media/doc/Secure%202.0_Section%20by%20Section%20Summary%2012-19-22%20FINAL.pdf