John Mateyko, APMA®, WMCP™, RICP®  on 529 to Roth IRA transfer rule

You may have seen news reports about a change in the financial planning landscape set to impact parents, grandparents, and other family members who want to utilize 529 plans for college savings. 

The change is part of the 2022 SECURE Act 2.0 and is effective as of 2024. It allows 529 account beneficiaries to roll over funds from their 529 plan to a Roth IRA. While it’s exciting news, keep in mind that rollovers from 529 plans to Roth IRAs are only permissible if certain criteria are met, including:

  • Beneficiaries of 529 plans can roll over only $35,000 to Roth IRAs during their lifetime.
  • Rollovers are subject to Roth IRA annual contribution limits. 
  • Eligible 529 accounts must be more than 15 years old. 

Traditionally, families with multiple children transferred unused funds from one 529 account to another to maximize college savings. With the new rule, parents or guardians may want to allow children who don’t exhaust their 529 to use the limited Roth IRA rollover option, potentially kickstarting their child’s retirement or supporting other financial goals.

It gets complicated, however, if one child has completed their education and, before this 2024 change, a parent or guardian renamed the beneficiary so unused funds could be accessed by another college-bound child. 

The good news is there is a logistical workaround worth considering. Rather than changing the beneficiary of an account, simply request a rollover of funds to the other child’s existing 529 account. This leaves the original account (and its 15-year lifespan) intact and allows for future transfers between siblings if warranted. Keep in mind you can only do this once every 12 months. 

This material is intended for informational purposes only, and is not intended to provide tax advice. Please consult your tax advisor for tax advice for your specific situation.

About John Mateyko, APMA®, WMCP™, RICP®

In the ever-evolving world of finance, John Mateyko’s expertise shines a light on the growing preference for custom-made retirement plans. As the founder and managing partner of IDEX Financial, he is reimagining how retirement planning is done, infusing it with new ideas and approaches. His methodology goes beyond mere digits, instead focusing on the individuality, aspirations, and goals of each client. John Mateyko sees a future in which bespoke financial planning enables people to approach their retirement with confidence, assured that their strategies are tailored to their specific requirements.

In these times of increasingly bespoke financial management, John Mateyko is dedicated to utilizing his knowledge and resolve to help those seeking financial security while living a life filled with experiences that money alone cannot buy.

About IDEX Financial

IDEX Financial is committed to a non-biased approach that reveals market potential. They place a high value on education, acknowledging its role as an instrument to steer clients towards economic success. At IDEX Financial, they promote an active strategy, adopting tactics that aim to truly improve their clients’ financial health. They appreciate lasting relationships and offer support to clients as they navigate the various financial transitions they may face throughout their lives.

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This article was written by roged01