Just over a year ago (December 2022), the SECURE 2.0 Act was signed into law. That legislation contained an extensively discussed provision – allowing excess dollars in a 529 college savings plan to be rolled over to a Roth IRA. At the time, we knew there were a couple of unanswered questions in the law as it pertained to the 529-to-Roth transaction. However, since the 529-to-Roth rollover was not permitted until this year (2024), it was anticipated that any nebulous language or confusion would be cleared up well before the 2024 calendar change.
Well, it is a year later, and we have received no guidance from the IRS concerning 529-to-Roth-IRA rollovers. We are now live. This transaction can be completed, and this year we have already spoken to advisors looking to move 529 money to a Roth IRA. As this is a brand-new strategy for 2024 and beyond, it is important to understand the finer points of the transaction - as well as the still-unknown details:
It is important to be aware of the finer details of a 529-to-Roth IRA rollover. But also recognize that some questions remain unanswered.
By Andy Ives, CFP®, AIF®
Ed Slott and Company, LLC
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Christian Cordoba, founder of California Retirement Advisors, has been a member of Ed Slott's Master Elite IRA Advisor Group since 2007.