Financial Plan

Can I Roll my Traditional IRA into a 529 College Plan?

Posted by Denish Kovach, CFP®, AIF®

The short answer is “Not without paying taxes.” The IRS considers moving money from your IRA to a 529 plan as a distribution included in your taxable ordinary income. Plus you would face an additional 10% penalty if you are not yet age 59-1/2. So rather than opening the 529 plan you might consider using the IRA distribution for the education expense, as distributions from your IRA being used for higher education are exempt from the 10% penalty. These expenses include tuition, fees, books, supplies, and equipment at an eligible institution. Keep in mind that while these distributions are penalty free, they are still considered taxable income.

Alternatively, you may consider opening a 529 plan and begin making contributions from your regular income rather than your IRA. This way you can avoid both the ordinary income and early withdrawal tax and begin to grow the 529 plan over time.

Click here for more information on Denise. To set up a free consultation with Denise, either call 407-869-9800 or complete this form.

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Published by
Donny Morehouse

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