Wealth management and financial planning; for individuals and businesses.
Wealth management and financial planning; for individuals and businesses.
Maximize Your Savings with the 529 to Roth IRA Rollover
Megan Williams • Apr 16, 2024
At Meritrust Wealth Management, we are constantly keeping an eye on legislative changes that can impact your financial planning. One of the notable changes introduced by the 2022 SECURE Act 2.0, which takes effect in 2024, is the ability to roll over funds from a 529 plan into a Roth IRA. This is a significant update for anyone involved in educational savings plans, including parents, grandparents, and other family members.
Understanding the New 529 to Roth IRA Transfer
The new legislation allows beneficiaries of 529 plans to transfer up to $35,000 to Roth IRAs during their lifetime. However, this rollover is bound by the Roth IRA’s annual contribution limits, which can affect how much can be transferred each year. Additionally, for a 529 account to be eligible for this rollover, it must be more than 15 years old. It's important to note that if the account's beneficiary is changed, the 15-year clock for eligibility resets.
This option provides a unique opportunity for those beneficiaries who do not utilize the full amount of their 529 for educational expenses. Instead of the funds sitting idle or being subjected to non-qualified withdrawal penalties, they can now potentially be used to kickstart a child’s retirement savings.
Strategic Considerations
For families with multiple children, the common practice of transferring leftover funds from one child’s 529 plan to another can still be a viable strategy to ensure the efficient use of college savings. However, with the new rollover option, it may be advantageous to consider allowing children who have surplus 529 funds to convert these into Roth IRA contributions instead.
This shift can help in fostering early financial independence and support other long-term financial goals. But, this strategy requires careful planning. For example, if a child has completed their education and there is a remaining balance in their 529 plan, instead of renaming the beneficiary to allow another child to use these funds, you might consider requesting a rollover to the other child's existing 529 account. This maneuver keeps the original account intact, preserving the 15-year requirement and enabling future transfers between siblings if needed—though this can only be done once every 12 months.
Navigating Complexity
We understand that these changes can be complex and may bring up several questions about the best strategies for your family’s financial planning. Each family’s situation is unique, and the right approach depends on numerous factors including the number of children, the amounts saved, and long-term financial goals.
Meritrust Wealth Management is here to help you navigate these new options. If you have any questions about how the new 529 to Roth IRA transfer might impact your financial planning, or if you need assistance with any other financial planning or investment strategies, do not hesitate to reach out. You can contact us for further information or to schedule a consultation. Your financial well-being and peace of mind are our top priorities.
The body content of your post goes here. To edit this text, click on it and delete this default text and start typing your own or paste your own from a different source.
In the world of financial management, experienced advice is invaluable. Jay Conner, a prominent investment adviser at Meritrust Wealth Management, stands out with 22 years in financial advising and 18 years in his current role. His expertise is highlighted in a recent profile that sheds light on his approach to investing and retirement planning. Here's quick look - Common Mistakes in Investing Jay Conner points out that many investors fall into the trap of being influenced by financial and social media when making investment decisions. He advises individuals to focus on their personal goals, needs, and wants rather than comparing themselves to others. This inward focus helps tailor financial plans that are truly beneficial on an individual level. Planning for Retirement When it comes to retirement planning, Conner stresses the importance of understanding one's own goals and desires. Retirement savers should begin the complex process of quantifying their needs and wants for their post-work years. This understanding guides how much they need to save and how to strategically invest their retirement funds. Investment Strategy Post-2023 Market Gains Following significant gains across all major U.S. markets in 2023, Conner recommends that long-term investors stay their course with a well-thought-out plan tailored to their retirement needs. Historical data supports this approach, as the S&P 500 tends to rise following all-time highs. Career Inspiration and Personal Insights Conner's passion for financial advising was inspired by childhood memories of discussions about stocks and the economy with his family. His career is driven by a continuous desire to learn and adapt to the unique financial situations of different individuals. Outside of his professional life, Conner is actively involved in volunteering at his children’s school and with local nonprofits, demonstrating his commitment to community service. Investing a Hypothetical $1 Million On a lighter note, if faced with the decision to invest $1 million in one company, Conner would choose Amazon due to its vast array of offerings and essential web services. However, he clarifies that investing such a large sum in a single stock isn't a prudent strategy. Dream Retirement Looking ahead, Conner envisions a retirement that allows him to continue helping others with their investments. He also dreams of being a golf course ranger in a warmer climate during the winter months, sharing and creating stories like those he has admired in others. Jay Conner’s insights offer a thoughtful blend of personal and professional wisdom, reflecting a deep understanding of investment strategies tailored to individual needs. For more in-depth knowledge and detailed guidance from Jay, you can read the full article here .
As inflation continues to be a hot topic both nationally and globally, many of our clients find their concerns are much more personal. Specifically, the impact inflation has on the value of retirement savings is a significant worry. Over time, inflation can erode your nest egg, pulling you away from your retirement goals rather than closer. Research by LIMRA in 2016 highlighted a startling fact: a 1% inflation rate over twenty years could reduce your Social Security benefits by $34,406. If inflation rises to 3%, this loss could balloon to over $117,000. Additionally, the Centers for Medicare and Medicaid Services noted a 4.6% increase in healthcare expenditures in 2018, surpassing the average inflation rate of 2.4% for the same period. This means that specific costs, particularly healthcare, can escalate faster than general inflation, further impacting retirement savings. Beyond healthcare, housing, travel, and support for children and grandchildren also play roles in how quickly retirement funds might dwindle.
Disclosure
Securities offered through Kestra Investment Services, LLC, (Kestra IS) member FINRA/SIPC. Investment Advisory Services offered through Kestra Advisory Services, LLC, (KestraAS). Kestra IS and Kestra AS are affiliated entities. Kestra IS and Kestra AS are not affiliated with Meritrust Wealth Management. Investor Disclosures https://bit.ly/KF-Disclosures.
Privacy Policy | Terms of Use | Powered by Levitate
This site is published for residents of the United States only. Registered Representatives of Kestra IS and Investment Advisor Representatives of Kestra AS may only conduct business with residents of the states and jurisdictions in which they are properly registered. Not all products and services referenced on this site are available through every representative or advisor listed. For additional information, please contact Kestra IS Compliance Department at 844-553-7872.