by Wealth Strategies Partners

Paul Allen on Changes to 529 Accounts

There have been many recent changes to retirement account rules.

Starting this year, you are able to roll a 529 into a Roth IRA. Some are calling this new phenomenon the “Baby Roth,” which could theoretically give assets the longest possible time for tax-free compounding. Here’s the scoop on the new 529-to-Roth rules:

  1. 529 funds can be rolled to a Roth if:
    o They are held in the same name (owner of the Roth is the beneficiary of the
    529) and
    o The 529 has been open for at least fifteen years.
  2. 529 funds can be rolled to a Roth if:
    o Contributions and earnings made within the last 5 years cannot be transferred
    o Transfers count toward annual Roth contribution limit
    o Beneficiary must have earned income equal to the amount transferred each
    year (ROTH maximum income limits do not apply)
    o The amount is below the lifetime limit for rollovers

For those concerned with overfunding 529s or leaving a legacy, call us! We are here to help determine the best strategy for your circumstances and needs.

As a result of the SECURE ACT 2.0, unused funds in a 529 account can be rolled over to a ROTH IRA for the beneficiary. The 529 account must have been open for a minimum of 15 years and Contributions made to the 529 plan in the last five years, including the associated earnings, are ineligible for a tax-free transfer. Rollovers to a ROTH IRA are subject to the standard annual ROTH IRA contribution limits.

Any opinions are those of Paul Allen and Wealth Strategies Partners and not necessarily those of Raymond James.  This information is intended to be educational and is not tailored to the investment needs of any specific investor.  The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Investing involves risk and you may incur a profit or loss regardless of strategy selected. Neither Raymond James Financial Services nor any Raymond James Financial Advisor renders advice on tax issues, these matters should be discussed with the appropriate professional. Securities offered through Raymond James Financial Services, Inc., member FINRA/SIPC.  Investment advisory services offered through Raymond James Financial Services Advisors, Inc. Wealth Strategies Partners is not a registered broker/dealer and is independent of Raymond James Financial Services. Certified Financial Planner Board of Standards, Inc. (CFP Board) owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™, and CFP® (with plaque design) in the United States, which it authorizes use of by individuals who successfully complete CFP Board’s initial and ongoing certification requirements.

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