Can I roll a Traditional IRA into a 529 college account for my grandchild?

By Denise Appleby AAA
A:

A 529 plan, also known as a "qualified tuition program", is an investment vehicle that allows individuals to save for education expenses at an eligible education institution. "Eligible education institution" refers to any college, university, vocational school or other post-secondary educational institution eligible to participate in a student aid program. This includes virtually all accredited public, nonprofit and privately owned post-secondary institutions. Earnings in a 529 plan are tax free if used for qualified education expenses and can be set up by anyone.

Movement of assets from a Traditional IRA to a 529 plan would be considered a distribution from the Traditional IRA and a contribution to the 529 plan. As such, the distribution would be treated as ordinary income to the IRA owner for the year the amount leaves the IRA. Additionally, the credit to the 529 plan would be subject to the 529 plan rules, which include contribution limits.

For more insight, see Choosing The Right Type Of 529 Plan and Common IRA Rollover Mistakes.

This question was answered by Denise Appleby.

RELATED FAQS

  1. Where did the term Magna Cum Laude originate from and why is it used in academics?

    Learn what "magna cum laude" means, read about its etymology and review why academic institutions use this phrase and other ...
  2. How does someone earn the designation Magna Cum Laude?

    Discover the meaning and origins behind the term magna cum laude, an academic designation used to award honors students at ...
  3. What is the difference between Magnum Cum Laude and Summa Cum Laude?

    Learn what the terms "magna cum laude" and "summa cum laude" mean and how different universities determine which students ...
  4. How does a defined benefit pension plan differ from a defined contribution plan?

    Learn the differences between defined benefit plans and defined contribution plans when reviewing employer-sponsored qualified ...
RELATED TERMS
  1. Self Invested Personal Pension (SIPP)

    A tax-efficient retirement savings account available in Great ...
  2. Reloaded

    A slang term meaning that a consumer who was previously defrauded ...
  3. Age Discrimination In Employment Act Of 1967

    A federal statute protecting "certain applicants and employees" ...
  4. Senior Move Manager

    Senior move managers (SMMs) help seniors downsize and relocate ...
  5. Elder Care

    Elder care, sometimes called elderly care, refers to services ...
  6. Gold IRA

    Definition of Gold IRA

You May Also Like

Related Articles
  1. Professionals

    Are Longevity Annuities in 401(k)s a ...

  2. Mutual Funds & ETFs

    Greedy on the Dollar? See This Leveraged ...

  3. Professionals

    Why Retirement Advice Is Better But ...

  4. Professionals

    Coming Soon: Private Equity In 401(k) ...

  5. Professionals

    Ways To Cut 401(k) Expenses

Trading Center