A 529 plan is an investment vehicle that allows you to save for a beneficiary’s college education. If the funds are used for education expenses, the growth is tax free. Keep in mind there is an owner and a beneficiary. The owner can change beneficiaries at any time in the event the original beneficiary gets a scholarship or another beneficiary is short on college funds because they didn’t get a scholarship.
So in the Secure Act 2.0, there is a provision that allows beneficiaries in 2024 to be able to roll 529 plan funds to a Roth IRA. This is generally good news. But here’s a catch that many people are missing. First, the 529 plan had to have been in existence for 15 years. Second, it limits the rollover to contribution limits and sets a $35K lifetime limit on what is rolled over from a 529 plan.
This is something I’m getting questions on daily and there is a major confusion. If this is something you are interested in doing, I highly suggest working with a competent financial professional and a CPA that is knowledgeable in the provisions of the Secure Act 2.0.