Unlocking Financial Opportunities: The Art of 529-to-Roth Rollovers Explained by RWM Financial Group

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Hey there, savvy savers! Ready to dive into the nitty-gritty of 529-to-Roth IRA rollovers? The SECURE 2.0 Act has opened up a whole new avenue to shuffle around those unused 529 funds for the benefit of your loved ones’ retirement. Let’s break it down, RWM-style.

So, picture this: you’ve been stashing away in a 529 account, dreaming of a bright college future for your kiddos. Fast forward to the SECURE 2.0 Act, and now you’re thinking, “What if I could turn these leftovers into a retirement nest egg?” Well, guess what? You can!

Starting this year, 2024, the new provision allows you to roll over unused 529 assets (up to $35,000) into the beneficiary’s Roth IRA without facing the dreaded 10% penalty or stirring up any taxable income drama. Great news, right? Especially for those of us wondering what to do with excess 529 funds just hanging around like a third wheel at a party.

But hold up! Before you start envisioning your money making its way to Roth paradise, Brahm Rossiter, our Chief Investment Officer at RWM Financial Group, puts it into perspective. “Transforming unused 529 funds into Roth savings is not just a financial move; it’s a strategic journey towards securing a brighter future. At RWM Financial Group, we believe in empowering individuals to make informed choices that pave the way for financial freedom and generational wealth.

Now, let’s talk limits. You can’t just waltz into 529-town, grab $35,000, and sashay into a Roth party. There are rules, dear friend:

Holding Periods

Your 529 needs to have clocked at least 15 years before the rollover dance begins. No shortcuts allowed! Contributions from the last five years before distributions? Sorry, they’re not invited to this tax-free rollover fiesta.

Annual Limits

Your rollover can’t outshine the annual Roth contribution limit, which is currently $6,500, in 2023. So, if you’re eyeing that $ 35,000 lifetime limit, you’ll be doing it over six years – unless the Roth contribution limit does a little cha-cha upwards in the future.


The beneficiary of the 529 must be the proud owner of the Roth IRA and must have earned income equal to the rollover amount. Fair’s fair!

Now, here’s where it gets a bit tricky. These are the rules according to the legislation. The IRS might throw in a plot twist during implementation, and some details are still up in the air. For example, can you switch 529 beneficiaries before a rollover, or does that trigger a brand new 15-year holding period? And who’s footing the bill if things go south? Uncertainty alert!

But fear not! If you’re eyeing this new provision with a hopeful gleam, here’s a checklist to chat about with your planning professional:

Hold Your Horses

If you’ve got a 529 plan, no need to make a move just yet. 2024 is the starting gun, and we’re still waiting for the final rules. Patience is key.

Kiddo’s 529 Game Plan

If you’re thinking of making yourself the beneficiary ninja to sidestep Roth IRA contribution rules, hold on. Let’s wait for the lowdown on the lifetime contribution amount and that 15-year holding period.

Roth IRA for the Win: 9 Game Plan

Regardless of the IRS dance, consider opening a Roth IRA for the beneficiary. Get those retirement savings going when the tax rates are friendly and efficient!

Backup Plans

Got an overfunded 529? Fear not! Switch beneficiaries, use it for educational purposes, tackle student loans, or tap into it for a tax-free scholarship – plenty of options on the table.

In a nutshell, this new 529-to-Roth rollover is like your financial safety net, not the main event. So, keep it in your back pocket, chat with your planning pro, and let’s navigate this new terrain together! Contact RWM Financial Group

This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.