Did you know you can rollover a 529 plan into a Roth IRA? It’s now possible to take 529 funds not used for college, avoid withdrawal penalties, and roll those funds into a Roth. If this sounds like a strategy you might want to consider, here are five key things to remember:
⚡️The 529 plan needs to be open for at least 15 years and the funds converted must have been contributed at least five years ago.
⚡️The maximum lifetime conversion from a 529 to a Roth IRA is $35,000.
⚡️The amount you can roll over annually is based on IRA contribution limits. For 2024, that’s between $7000 and $8,000. So it takes several years or more to roll over the full $35,000 lifetime maximum from a 529 to a Roth.
⚡️Any transfer from a 529 to a Roth is reduced by other contributions you make to an IRA that year.
⚡️In order to qualify for this strategy, the beneficiary must have income at least equal to the amount being rolled over.
💡All in all, this could be a great opportunity to boost retirement savings for a 529 beneficiary. But be sure to talk with a financial planner to determine if it’s the right move for you.
