Secure Act 2.0 Offers a New Opportunity for 529 Funds

Bellingham, WA, June 7, 2024 – The SECURE 2.0 Act, which went into effect at the beginning of 2024, allows investors to rollover unused funds from their 529 plan into a Roth IRA without incurring tax penalties.

After saving for college, beneficiaries may be looking ahead toward saving for retirement. A 529 plan is a state-sponsored account for college and other qualified educational expenses. The beneficiary may have funds sitting in their 529 account if they saved more than they spent on college, or from opting out of college entirely. Normally, withdrawing funds from a 529 for nonqualified expenses would incur a 10% tax penalty. However, with the SECURE Act 2.0, 529 plan beneficiaries can rollover their unused funds into a Roth IRA with no tax penalty.

The beneficiary of the 529 plan must be the same individual as the owner of the Roth IRA. The beneficiary must have owned the 529 account for a minimum of 15 years, and contributions made in the previous five years are not eligible for withdrawal. The amount of the rollover may not exceed the annual Roth contribution limit, which is $7,000 for the year 2024. The total amount an individual may rollover from a 529 into a Roth IRA is limited to $35,000.

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