Without a doubt, you remember the day your child was born like it was yesterday—the excitement, the anxiety, the joy. You probably fantasized about the future your child will have as you held them in your arms, rocking them to sleep. Enter the 529 account: A tax-advantageous account that you can dedicate money to each year, in your child’s name, in preparation for your child’s future education.
Let’s fast forward. You have contributed money each year to your child’s 529 account, and have developed a nice sum of money. Before you know it, it’s college decision time and that money is finally ready to stretch its legs paying for tuition, and qualified expenses, like books, electronics, and so on. But hold on—maybe your child got a great scholarship, or decided that a 529-qualified apprenticeship would be more their speed.
All of a sudden, you don’t need every penny you saved in your child’s 529 account. What do you do then?
Starting this year, you can roll spare 529 funds in your child’s name into a Roth IRA for their future retirement thanks to the SECURE Act 2.0. SECUR [ Setting Every Community Up for Retirement] according to the my529.org website. After all, if their schooling is covered, why not set up your child for their retirement?
Naturally, there are a few stipulations to keep in mind before you start rolling over money to a Roth IRA. The my529.org website recommends you consider the following:
- The account must be active (and in the beneficiary’s name, per CNN) for 15 years at the minimum.
- The amount put into the Roth IRA cannot go over the maximum yearly contribution, which is $7,000 per year as of 2024 for those under the age of 50, according to Fidelity.
- The maximum amount of money that you can roll into a Roth IRA from a 529 account is $35,000.
- If you contributed money to the 529 account in the last five years, you cannot contribute that sum, or any of the interest built on it, to the Roth IRA.
Even if you don’t meet the criteria, you…
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