How to Rollover Your 529 Plan into a Roth IRA
Do you have leftover funds sitting in a 529 plan? If so, you may be able to roll these funds over to a Roth IRA.
The SECURE 2.0 Act, a recent federal legislation, brought a transformative change for Indiana 529 plan account owners. These individuals can now roll over their remaining, unused 529 plan account balances to fund Roth IRAs.
What is a 529 Plan?
A 529 plan is a tax-advantaged savings plan designed to encourage individuals and families to save for future higher education expenses. Named after Section 529 of the Internal Revenue Code, these plans are officially known as "qualified tuition plans."
One of the primary benefits of 529 plans are the tax advantages; earnings on contributions grow tax-free, and withdrawals for qualified educational expenses are also tax-free at both the federal and state levels. Additionally, beneficiaries may be eligible for a state income tax credit or deduction for contributions made to the plan, providing further financial incentives to save for educational purposes.
Requirements to Rollover a 529 Plan
The 529 account must have been open for more than 15 years.
The eligible rollover amount must have been in the 529 account for at least 5 years.
The annual rollover limit is subject to Roth IRA annual contribution limits ($7,000 for 2024; $8,000 for individuals age 50 and older).
There is a lifetime rollover limit of $35,000 for each 529 account beneficiary.
Rollovers can only be made to the Roth IRA account owned by the named 529 account beneficiary.
Roth IRA income limits do not apply for this type of contribution.
How to Rollover Your 529 Plan into a Roth IRA
This process to complete the rollover is fairly straightforward.
Step 1: Call Your Financial Advisor and Request a Rollover Check
To roll over your remaining 529 plan funds to a Roth IRA in your name, you will need to call your financial advisor, and they will call the 529 plan provider with you to request a rollover check (this is the same process used to rollover an old 401(k) to an IRA/Roth IRA).
Step 2: Deposit the Check
The check would then be mailed to either you or your advisor’s place of business to be deposited into your Roth IRA.
What if I Don’t Have an Advisor?
If you don’t already have a financial advisor or an active Roth IRA, one of the helpful advisors at Aurora Financial Strategies would be more than happy to guide you through the rollover process and opening a Roth IRA. Contact Aurora Financial Strategies to get started.
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