There are some great changes happening for Indiana 529 accounts starting in 2024.
People will begin to have the ability to roll 529 accounts to Roth IRA’s in 2024. There are some limitations but it is an excellent program. Often, people ask, “Why should I put money into a 529 if I don’t know if the child will ever go to college?” Here is a great reason why.
Some of the limitations are:
The money has to be rolled into the child’s Roth IRA (most likely an adult by then) and not the parents’.
There is a $35,000 lifetime cap for rollovers (It doesn’t clearly state, but should be per beneficiary).
The rollovers are subject to the yearly Roth IRA contribution limits (It does not say whether the rollovers will interfere with the ability to make current year contributions also).
The 529 account has to be opened for 15 years before rollovers can be made (It looks like changing beneficiaries could possibly restart the clock).
Money earned and contributed in the last 5 years cannot be rolled over.
It seems like with most of the limitations, time is in your favor. If you just wait until you own it for 15 years, you can roll it over. If you wait for the contributed money to be in there for 5 years, the money can be rolled over. Using my calculators, I determined that if a parent rolls the money into their child’s IRA starting at age 22, there would be almost $65K in the account by age 62. Every dollar would be a tax-free gift to their children.
This information was provided by Jamie Hopper, Certified Financial Planner with Money Concepts. If you have further questions, please contact him at [email protected].