Research & Insights

New Rule Allows College Funds To Roll Over Into Roth IRAs

• 2 min read

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Got money left over in a 529 college fund? Now you have a new investment option.

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graduates throwing their caps in the air in clebration

Your university student just graduated, so what do you do with the leftover cash in the 529 college savings plan?

Thanks to last year’s federal SECURE 2.0 Act, you can now create a Roth IRA for the student.

Previously, options were limited. They include withdrawing up to $10,000 to use on qualified education loans for the beneficiary or a sibling, changing the account beneficiary to a member of the family of the prior beneficiary,or biting the bullet and pulling the money out and paying taxes plus a 10% penalty on the earnings.

The new provision’s rules will be available in 2024 and will include:

  • Beneficiaries are permitted to rollover up to $35,000 into the Roth IRA over the course of their lifetime.
  • The annual amount that can be rolled over is limited to the normal contribution limits, including the earned-income provision, but not including the upper income constraint.
  • The 529 plan must have been open for more than 15 years.
  • Contributions and earnings on contributions from the last five years are not eligible to be rolled.

Talk to your AMG tax advisor to take advantage of this new opportunity.

AMG Has Your Taxes Covered

Many of our clients choose to take advantage of AMG’s in-house tax department to assist with their personal, corporate, and trust filings.
 
To better understand the benefits of integrating financial planning, tax planning, trust administration and tax preparation, schedule a free consultation with an AMG advisor.

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This information is for general information use only. It is not tailored to any specific situation, is not intended to be investment, tax, financial, legal, or other advice and should not be relied on as such. AMG’s opinions are subject to change without notice, and this report may not be updated to reflect changes in opinion. Forecasts, estimates, and certain other information contained herein are based on proprietary research and should not be considered investment advice or a recommendation to buy, sell or hold any particular security, strategy, or investment product.

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