529 Rollover: Approved Ways That Your Funds Can Move
Some people get excited by leftovers, at least when they’re taken out in the fridge. As a savvy saver, you should look at leftover funds in your NC 529 Account the same way — they’re a nice treat! Unlike fridge leftovers, though, leaving your earnings untouched in a 529 plan doesn’t mean they’ll spoil. Your funds can continue to grow tax-free. You can also roll over excess funds to a different account and keep enjoying the tax advantages.
Before deciding to initiate a 529 rollover, you should understand the limitations of where this money can move and what it can be used for. (Yes, it still needs to be used for education purposes to avoid taxes, penalties, and fees.) Learn how to move your hard-earned savings from a 529 plan to another account and make the most of your leftovers!
What Is a 529 Rollover?
You may have heard of the term “rollover” if you’ve switched jobs and had to decide whether to transfer your previous 401k into another retirement account. 529 rollover rules also allow you to move funds to another education savings account and, in some cases, to your beneficiary’s Roth IRA. (More on this type of rollover later.)
Moving Funds Between NC 529 Accounts
Moving your NC 529 funds from one NC 529 Account to another is easy and hassle-free, and there are many situations where it makes sense. Let’s say your child doesn’t use all of the funds in their NC 529 Account because they received a scholarship or decided not to attend college. You have the option to change the beneficiary to another family member (even yourself) or simply roll over the funds to their NC 529 Account.
The NC 529 Program Description currently defines a 529 rollover as any transfer of funds that involves a change in the beneficiary and is:
- between NC 529 Accounts
- to or from another state’s Qualified Tuition Program (529 plan)
- from an NC 529 Account to an ABLE account
Good news: These rollovers generally don’t hit you with state or federal income taxes, and the amount you roll over isn’t included in your taxable income either. Check with a financial advisor to confirm how a 529 rollover could impact your financial circumstances.
Transferring Funds from Another State’s Program
Have you recently moved to North Carolina, and you’d like to roll over your funds from a previous state’s education savings program to an NC 529 Account? We have all the forms to create and manage your account on our website. Scroll down to “Contributions” and select “Incoming Rollover Form” to get started moving your funds to an NC 529 Account.
Out-of-state savers are always welcome with the NC 529 Plan! If you move out of North Carolina, you’re not required to roll over NC 529 funds to your new state’s program. And, you can still take advantage of the tax benefits when you use the account for qualified education expenses such as K–12 tuition, college expenses, career/technical programs, and more.
Roth IRA Rollovers
Beginning in 2024, families can use their NC 529 plan to save for college and retirement. Families will be able to roll over their excess NC 529 funds into a Roth IRA account for their beneficiary. These rollovers are tax-free and not subject to the Roth IRA income limits. Before you do this, here are a few things you should know:
- The 529 account must be opened for the designated beneficiary for at least 15 years, and rolled-over funds must have been in the account for at least five years.
- Funds must be transferred into the beneficiary’s Roth IRA account.
- There is a lifetime maximum of $35,000 that can be rolled over from a 529 account to a Roth IRA.
- Any rollover contributions apply toward yearly maximum Roth IRA contributions.
NC 529 Keeps It Simple
Many financial decisions feel far from simple, and we’re here to help you understand what factors to consider when making moves such as an NC 529 plan rollover. If you still have questions about how to roll over leftover funds, contact us.
To learn more about the NC 529 Plan and why it’s a great way to save for education, visit our Program Highlights section. And when you’re ready, open an NC 529 Account in minutes with as little as $25.