529 -> Roth IRA Contributions

TL;DR: You can now contribute up to $35k of excess funds from your 529 to your Roth IRA.

Beginning in 2024, the Secure ACT 2.0 (signed into law by Biden) means you can move up to a lifetime cap of $35k from your 529 to your Roth IRA. The Roth IRA must belong to the beneficiary of the 529 (usually the student, not the parent). This means that if you have overcontributed, you can move some of the excess funds into jumpstarting a retirement fund!

Some rules: the 529 account must have been opened for at least 15 years, and you cannot contribute funds that were added in the most recent 5 years. Also, you still have to adhere by the Roth IRA contribution maximum (which is, for example, $6500 in 2023).

This could be mean extra tax-savings if you live in a state like Illinois, where you can get a state tax deduction for 529 contributions. This also means that your money can grow tax-free for longer, if you contribute now to the 529 and get to roll it over later to the Roth IRA.

This definitely opens up some room for creativity!

Happy 529 converting!

TheJKW