Allworth Advice: A 529 rollover ‘no-no’
Cincinnati Enquirer
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Question: Shelly in Colerain Township: I have a 529 plan set-up for my daughter. Can I roll over money from my IRA into her 529?
A: Yes, you technically can take money from an IRA and deposit it into a 529 college savings plan. But there’s a big ‘but.’ Unlike the simplicity of something like a 401(k)-to-IRA rollover in which there’s no triggering tax consequence, the same doesn’t hold true for what you’re suggesting. You would have to take a distribution from your IRA, pay the ordinary income taxes (and the 10% early withdrawal penalty assuming you’re younger than 59 ½), then deposit the remaining money into your daughter’s 529 plan. As you can see, it’s not the most tax-efficient approach.
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