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College Funds Now Transferable Tax-Free to Roth IRAs!

Audio version available here:

Length: approx. 1 min. 10 sec.

Those who have qualified tuition plans, also referred to as Sec. 529 plans, for their children's college funds, may be familiar with the headache of transferring funds between children and retirement accounts. Before, you could only roll over funds from one child’s account to another child's if the funds were not yet depleted. Now, starting in 2024’s tax year, funds from a 529 account may be transferrable to a Roth IRA in the same beneficiary’s name tax-free, so they may keep the original amount leftover (up to $35,000) rather than transferring it to another child. This can help boost your child’s retirement fund early in life. However, there are a few caveats to this new transfer option. The most problematic is the rule that a tax-free transfer to a Roth IRA can only be done when the 529 account has been maintained in a beneficiary’s name for 15 years. This makes it difficult, especially if a parent changes the beneficiary of an account. Because of this, careful planning is important for your children's future. For more information on transfers between 529 and Roth IRA accounts, check out our source article:

Silhouettes of four college students wearing graduation caps.


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