Is it possible to name yourself as the beneficiary of a 529 plan? Also, are there annual contributions limits into that 529 plan? If all the rules are followed, what stops a person from using a 529 plan as an alternative retirement account beyond a Roth IRA, and NOT a college fund, to bypass the standard Roth IRA contribution limits?
As a general rule, earned income is not required for rollovers (only contributions). But I'm expecting we'll see the new 529 provision tested once it rolls out in 2024.
Hello. I had a 529 plan for my son (the beneficiary). The account has been open more than 15 years but 3 years ago (because he was 21) I put the 529 account in his name as the account holder and he is also the beneficiary. Can he roll unused funds into a ROTH?
The key thing is he is the beneficiary. Also know that 529 to Roth transfers are limited annually to the IRA contribution limits (and don't forget about the lift time limit of $35k). Also, beneficiaries must have earned income similar to qualify for the transaction. Because this is such a new provision in the tax code with a lot of strings attached, I'd highly recommend conferring with a tax professional that knows your situation.
Do the owner of the ROTH IRA still need to earn income to be eligible to transfer from the 529 into the ROTH IRA? And can you only transfer up to the earned income amount?
No you don’t need earned income to contribute- for example if you start a 529 for your 3 year old, when he is 18 starting college (and making 0 money!) you can pull the annual limit for a Roth for that year even if they earn nothing.
I think the 529 has to be open 15 years but they just passed this and it doesn't go into effect for awhile, and there will specif regulations. Plan is you open 529 for kids and then if money left over, you can do this. It's not that much of a loophole
The language in this new provision is in the context of "rollovers" so I do not expect earned income to be a requirement. That said, the law is still being interpreted. I think the bigger question will be whether the beneficiary can be changed so parents and grandparents can use this provision.
So 35k into child’s 529. If child does not go to school…and at year 15 @ 8% = over 100k in 529. Let’s say in 15 years you will be able to contribute 10k a year to a regular Roth….then it will take 10 years to transfer 100k into Roth & child won’t be able to contribute to their individual roth account for that 10 years? (Furthermore 529 account will have grown over the 10 years of transferring)
Check out how the SECURE Act 2.0 changed REQUIRED MINIMUM DISTRIBUTIONS here: ruclips.net/video/AqrfTWIdot8/видео.html
Thanks for this clear and concise rundown. I am really curious about the beneficiary name change in the future.
This is a good overview of tax law. The right amount of detail was provided. I'll do this for my son.
Thanks for the fantastic video!
Great video. Thanks
8:04 Any update on this topic now that we are in 2024? Have people tried to transfer 529s back to self and rollover to Roth?
Very interesting!
If I transfer a 529 plan from Vanguard to Fidelity, does it reset the 15 year rule or does it go off the origination date from the Vanguard?
Is it possible to name yourself as the beneficiary of a 529 plan?
Also, are there annual contributions limits into that 529 plan?
If all the rules are followed, what stops a person from using a 529 plan as an alternative retirement account beyond a Roth IRA, and NOT a college fund, to bypass the standard Roth IRA contribution limits?
Great information!
Question: can the 529 contributions be rolled over to an existing Roth account or must a new Roth account need to be opened?
How much can you transfer? ROTH only allows $7,000/year.
If all this hold true as described. During transfer, will interest also transfer or only principle?
I have question about transition from 529 to Roth IRA
When they says starting in 2024, does that mean I can use 2023 tax year money to fund the roth being that it is now 2024?
Can a retired person do the rollover to his IRA when he does not have earned income ?
As a general rule, earned income is not required for rollovers (only contributions). But I'm expecting we'll see the new 529 provision tested once it rolls out in 2024.
Hello. I had a 529 plan for my son (the beneficiary). The account has been open more than 15 years but 3 years ago (because he was 21) I put the 529 account in his name as the account holder and he is also the beneficiary. Can he roll unused funds into a ROTH?
The key thing is he is the beneficiary. Also know that 529 to Roth transfers are limited annually to the IRA contribution limits (and don't forget about the lift time limit of $35k). Also, beneficiaries must have earned income similar to qualify for the transaction. Because this is such a new provision in the tax code with a lot of strings attached, I'd highly recommend conferring with a tax professional that knows your situation.
So do I have to wait to start a 529 ? Or can I start it now ?
Start now to get the 15 year clock going.
Do the owner of the ROTH IRA still need to earn income to be eligible to transfer from the 529 into the ROTH IRA? And can you only transfer up to the earned income amount?
No you don’t need earned income to contribute- for example if you start a 529 for your 3 year old, when he is 18 starting college (and making 0 money!) you can pull the annual limit for a Roth for that year even if they earn nothing.
Being retired, I cannot contribute to a Roth as I have no earned income. So I could not put unused 529 funds from my child into my Roth, correct?
I think the 529 has to be open 15 years but they just passed this and it doesn't go into effect for awhile, and there will specif regulations. Plan is you open 529 for kids and then if money left over, you can do this. It's not that much of a loophole
The language in this new provision is in the context of "rollovers" so I do not expect earned income to be a requirement. That said, the law is still being interpreted. I think the bigger question will be whether the beneficiary can be changed so parents and grandparents can use this provision.
@@TrueNovice My thought was to spend down 529 to 35K, change beneficiary to me, then send 6500 to my Roth each year.
So 35k into child’s 529. If child does not go to school…and at year 15 @ 8% = over 100k in 529. Let’s say in 15 years you will be able to contribute 10k a year to a regular Roth….then it will take 10 years to transfer 100k into Roth & child won’t be able to contribute to their individual roth account for that 10 years? (Furthermore 529 account will have grown over the 10 years of transferring)