529 Transfer to Roth IRA
I just completed a $7000 transfer from my son’s 529 plan to his Roth IRA. I thought this amount would count as his 2024 contribution. At Schwab, it has been coded as a rollover, not a current year contribution. They told me that in addition to this rollover, he also could make a $7000 2024 contribution (assuming he has the income). Is this true?? If so, that means for the next 5 years he could get a total of $14,000 deposited per year. I hadn’t read this anywhere, so hoping you can shed some light. Thanks!
Permalink Submitted by Alan - IRA critic on Thu, 2024-11-07 15:46
Schwab is incorrect. They should correct the coding so that the Form 5498 shows a regular Roth IRA contribution (not a rollover). This will fill the regular Roth IRA contribution space for your son for 2024 and no additional regular contributions can be made.
This is clearly stated on p 2 of the 2024 1099R Inst.
There is a requirement that the 529 had been opened for at least 15 years and held at least a 7000 balance 5 years ago, and it is not yet clear if this child had to be the beneficiary for the entire 15 years or not.
Good job noticing the Schwab coding error right away. They have time to correct it before the 5498 forms are issued in 6 months.