Has anyone tried to rollover funds from a 529 to a Roth IRA yet?

[Ncc1701]

I called the New york 529 plan folks who told me that it is the brokerage firm that holds the Roth IRA that must send them a transfer request with a letter of acceptance. There is no way to do this on their website.

Just curious what others are hearing. Thanks!

 

[Slim11]

Since its new this year, and thier looks to be a lot of boxes to check off the list.
From the web:
https://www.schwab.com/learn/story/...is: Starting,or generating any taxable income.

 

[USGrant1962]

I looked on Vanguard's website yesterday and there was nothing but some old articles from when the law was passed. No instructions or forms or options to start the roll-over.

 

[rk911]

I'm just starting to investigate this as my nephew and his wife are expecting their first in June. My financial advisor told me if the 529 funds are never used for their primary purpose they can be rolled into a Roth IRA. The rollover must be executed by the custodian and only at a rate equal to the maximum annual Roth donation.

 

[Life_is_Good]

My grandchild has 529 plan funds with the Oregon College Savings program. THEY have a form to fill out that will send your funds to your Roth IRA custodian after you have the Roth IRA set up.

 

[copyright1997reloaded]

According to the Schwab article linked, the person must have EARNED income equal to or more than the amount rolled from the 529 to the Roth.

 

[jesaco]

The basic rules are clear enough. ie. must be opened for 15 years plus, limit of $35 thou lifetime, must not be over the IRA limits, have earned income equal to rollover etc etc. Most of us know that already but what I wanted to know is how to do the transfer. My son still has about $60 thousand left (saved for a private school but ended in a State school). called the 529 custodian and nobody knows how to do it. They say the ROTH ira custodian (Schwab) should request the rollover and Schwab says it the 529 custodian (NY saves) should do the direct rollover request. Both says there is no IRS guidance yet how to do it. all websites cites the rules but not the procedure how to do it.

 

[CP Soon]

Yeah, information on the 529 to Roth IRA rollover process is probably lacking awaiting IRS guidance. Until then, just wait until this guidance is clear while the money continues to grow. Perhaps, while waiting, just adjust the allocation to that of a more aggressive Roth IRA. 100% stock!

 

[FlaGator]

The basic rules are clear enough. ie. must be opened for 15 years plus, limit of $35 thou lifetime, must not be over the IRA limits, have earned income equal to rollover etc etc. Most of us know that already but what I wanted to know is how to do the transfer. My son still has about $60 thousand left (saved for a private school but ended in a State school). called the 529 custodian and nobody knows how to do it. They say the ROTH ira custodian (Schwab) should request the rollover and Schwab says it the 529 custodian (NY saves) should do the direct rollover request. Both says there is no IRS guidance yet how to do it. all websites cites the rules but not the procedure how to do it.

Thanks for being the pioneer for me! My accounts are at the same places and was wondering about it yesterday. Seems like we need to wait a couple of months for everyone to figure it out.

 

[CRLLS]

Question/Statement: What do you think? Since the IRS limits the annual rollover amount to the IRA limits for contributions and requires income, do you think a rollover + contributions in a given year would be allowed, or is the rollover considered your annual contribution?

The pessimist in me says the conditions sound eerily like only one or the other would be allowed in a given year.

 

[cathy63]

Question/Statement: What do you think? Since the IRS limits the annual rollover amount to the IRA limits for contributions and requires income, do you think a rollover + contributions in a given year would be allowed, or is the rollover considered your annual contribution?

The pessimist in me says the conditions sound eerily like only one or the other would be allowed in a given year.

The rollover is your contribution for that year. This is analogous to making an HSA contribution from your IRA, which is also allowed.

In either case, you're contributing money that was set aside in a prior year and has already appreciated, but you're still limited by the annual contribution cap. If you have the money to put directly into the Roth IRA, I think it's a better deal to do that and leave the 529 alone to grow.

 

[SecondCor521]

Question/Statement: What do you think? Since the IRS limits the annual rollover amount to the IRA limits for contributions and requires income, do you think a rollover + contributions in a given year would be allowed, or is the rollover considered your annual contribution?

The pessimist in me says the conditions sound eerily like only one or the other would be allowed in a given year.

You can do either or both in any tax year as long as the total of 529->Roth rollover plus any ordinary contribution to the Roth IRA is equal to or less than the individual's compensation for that year. (In addition to all the other rules already mentioned.)

So a $3000 529->Roth rollover and a $4000 ordinary contribution to a Roth IRA on compensation of $7000 or more is fine.

I agree with the general tenor of the thread that most 529 plans and Roth custodians are wanting IRS guidance before they proceed with these new rollovers. While the text of the new law is fairly concise and fairly clear, some questions remain that need to be clarified by the IRS and could affect how things are treated.

 

[jesaco]

I called the New york 529 plan folks who told me that it is the brokerage firm that holds the Roth IRA that must send them a transfer request with a letter of acceptance. There is no way to do this on their website.

Just curious what others are hearing. Thanks!

NYsaves529 plan finally has a "Direct rollover out to Roth" form, Just saw it come out in their website today. Direct rollover must be done thru the 529 Plan to the beneficiary's Roth custodian.
Last week I called, they did not have this form. They must have received the IRS guideline. FYI

 

[FlaGator]

NYsaves529 plan finally has a "Direct rollover out to Roth" form, Just saw it come out in their website today. Direct rollover must be done thru the 529 Plan to the beneficiary's Roth custodian.
Last week I called, they did not have this form. They must have received the IRS guideline. FYI

Thank you! Just grabbed it.

 

[FlaGator]

NYsaves529 plan finally has a "Direct rollover out to Roth" form, Just saw it come out in their website today. Direct rollover must be done thru the 529 Plan to the beneficiary's Roth custodian.
Last week I called, they did not have this form. They must have received the IRS guideline. FYI

Thank you! Just grabbed it.

Some info on the process timeline with the NY Plan:

3/18/24 - Mailed the form to Boston from the FL Panhandle
3/26/24 - NY Plan processed the request
4/03/24 - Funds are in the Schwab Roth

That's 16 days if I counted right. I started a transfer for the other kid last week, will advise if that is significantly different.

 

[RetMD21]

The Michigan plan finally has a form.They suggest checking with the Roth sponsor but Vanguard told me they don't have a form and will know what to do when they get the transfer. It is up to DD to proceed.

 

[FlaGator]

Some info on the process timeline with the NY Plan:

3/18/24 - Mailed the form to Boston from the FL Panhandle
3/26/24 - NY Plan processed the request
4/03/24 - Funds are in the Schwab Roth

That's 16 days if I counted right. I started a transfer for the other kid last week, will advise if that is significantly different.

Second transfer completed, just a bit quicker - 14 days. Mailed 3/29, received by Schwab 4/11.

 

[euro]

Second transfer completed, just a bit quicker - 14 days. Mailed 3/29, received by Schwab 4/11.

I did NYsaves to DD's and DS's Roths also - took about 3 weeks to process and arrive but everything went smoothly for both.