Unused 529 Plan Changes
While you’ve been saving like a boss for your kid(s) to go to college, a few changes were made that you should know about…
Buried deep inside Section 126 of the SECURE 2.0 Act of 2022, a special provision allows for tax and penalty-free rollovers from 529 Plans to Roth IRA accounts! That’s right…
- If your genius kid ended up getting a hefty academic scholarship;
- or your student athlete got a free ride;
- or your child chose not to go to college at all;
…then all of that cash you socked away for years into their 529 Plan can be shifted over to a Roth IRA in their name. And get this: Starting in 2024, they can roll over a lifetime maximum of $35,000.
Of course, there are some rules to follow, but nothing too complicated. For example, you can’t roll over any money from the 529 Plan into a Roth IRA without incurring penalties and taxes unless the account has existed for at least 15 years. But hey, if you’ve had their 529 Plan for awhile, this could be a game-changer!
Oh, and here’s another fun fact: Any money rolled over from a 529 Plan into a Roth IRA account will be subject to the Roth IRA annual contribution limits. But don’t worry, the limit for 2024 is currently scheduled to be $6,500, with an extra $1,000 allowed for individuals over 50 with the catch-up limit allowance.
All in all, this is great news for families who want to save for college without worrying about what happens if your kiddo doesn’t follow the path you thought they would. Sure, there are still some limits, but it’s definitely a huge step in the right direction.
If you have any questions about how to move unused 529 money into a Roth IRA in your kid’s name, give our office a call… we’re happy to explain things in greater detail.
IMS Capital Management
(503) 788-4200