Market Minute with Wealth E&P - 3/7/23

March 07, 2023
 Taking A Look At New Rules of the SECURE Act 2.0 That Take Effect in 2024

 

March 7, 2023

Welcome to Wealth Enhancement & Preservation’s Market Minute, where we get to update you on everything that happened in the financial markets this week. My name is Darrin Cohen, and I am the CEO of Wealth E&P.

I wanted to discuss some new and important rule changes on the SECURE Act 2.0, which specifically affects the ability to transfer 529 account funds into a Roth IRA once a student finishes college.

 

Beginning in 2024, the federal legislation known as the SECURE Act 2.0 gives a 529 plan beneficiary the ability to transfer 529 plan funds into their own Roth IRA without paying taxes or penalties. Here are a few rules that are really important to take into consideration: 

  • The 529 plan must have been open for a minimum of 15 years.
  • The owner of the Roth IRA must be the beneficiary of the 529 plan. This would be the student in this situation and not the person who necessarily funded the account.
  • The rollover is subject to the requirement that a Roth IRA owner have includible compensation or employment income at least equal to the amount of the rollover.
  • Contributions made to the 529 plan in the last five years, including the associated earnings, are ineligible for a tax-free transfer.
  • Transfers you make from a 529 to a Roth IRA count against your yearly Roth IRA contribution caps, which are currently at $6,500.
  • The maximum lifetime limit for rollovers is $35,000.

 

Feel free to let us know if you want to chat about this and what it would mean for you. Also, we recently hosted our Economic Update Dinner where we gave our outlook on the market right now and in the future; make sure to watch for that recording posted on our website soon.

If you have any questions about your portfolio, the economy, or if you want a risk profile or a retirement projection, please feel free to reach out, visit www.wealthep.com, or give us a call at (678)-739-0175. Otherwise, stay tuned for our Market Minute next week!

 

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At Wealth Enhancement & Preservation, we are here to serve as your financial advisor and source of support in the Alpharetta, GA, Cartersville, GA, and Charleston, SC areas. Our advisors are dedicated to simplifying the complexities of the financial world and as your advocate, we strive to learn about your most valued goals and dreams. From individual investors to entrepreneurs, our services work toward your success.

Prior to investing in 529 Plan investors should consider whether the investor's or designated beneficiary's home state offers any state tax or other state benefits such as financial aid, scholarship funds, and protection from creditors that are only available for investments in such state's qualified tuition program. Withdrawals used for qualified expenses are federally tax free. Tax treatment at the state level may vary. Please consult with your tax advisor before investing.

A Roth IRA offers tax deferral on any earnings in the account. Qualified withdrawals of earnings from the account are tax-free. Withdrawals of earnings prior to age 59 ½ or prior to the account being opened for 5 years, whichever is later, may result in a 10% IRS penalty tax. Limitations and restrictions may apply.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.

 

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