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In one of its final acts of 2022, Congress approved the SECURE Act 2.0, a bill designed to improve retirement savings. President Biden signed the bill into law on December 29, 2022. Many provisions of the SECURE Act 2.0 have been implemented, while others will start in 2024 and beyond. One provision scheduled to go into effect on January 1, 2024 involves leftover 529 assets and provides an opportunity for retirement planning. 

Starting in 2024, 529 account owners can transfer up to a lifetime limit of $35,000 from a 529 account into a Roth IRA for the same beneficiary. While the beneficiary must have earned income up to the amount you plan to convert to a Roth IRA, standard Roth IRA income limits do not apply, a benefit to higher earners. However, there are several stipulations to consider, including:   

  • The 529 account must have been open for at least 15 years. 
  • Contributions and earnings from the past five years are ineligible.   
  • Roth IRA contributions are still subject to the annual limits. (The Roth IRA contribution limit is $6,500 in 2023 and projected to increase to $7,000 in 2024).  

The new law represents an opportunity to convert excess educational savings into retirement savings. A Roth IRA can be a sound investment strategy and offers many benefits such as tax-free growth and tax-free withdrawals in retirement.  

Disclosures 

Past performance is no guarantee of future results.  Investing involves risk, including possible loss of principal.  Diversification may not protect against market risk or loss of principal.  The opinions expressed above should be construed as neither investment advice nor a solicitation to buy or sell securities.  Actual investor results may vary. 

Not FDIC Insured – No Bank Guarantee – May Lose Value