breaking news

Ex-Logan County superintendent guilty in child sex case out of jail

How to roll over a 529 plan, and why it may be a good idea

When my 10-year-old son was born, his grandmother generously put $1,000 into a Franklin Temple 529 plan for him. A 529 is a tax-advantaged savings plan for educational expenses. This IRA-like vehicle is a great way to help fund a child’s schooling.

For the better part of a decade, I, too, have been funding a 529 for my son. But my account is with Georgia’s Path2College program.

You can set up a 529 account and use it for qualified educational expenses in any state, no matter where you reside. If you live in Georgia, for instance, and you find a 529 plan offered, say, in Florida, with better investment options or lower fees, you could put your money there. But, there is usually a modest tax benefit to having your children’s 529 plans in your state of residence. For Georgia, that deduction is $4,000 per beneficiary.

My son’s original 529 plan had been set up by his grandmother’s long-time broker. Because it was an out-of-state account, we hadn’t been getting a Georgia tax deduction for it. And in reviewing the account details, I noticed it held higher cost investments. With these points in mind, I decided to transfer the Franklin Temple account into my Path2College 529.

Making such a transfer was new to me. Let’s talk about what I learned.

What happens when you roll over a 529 from one plan to another

The IRS allows for one tax-free rollover, per 529 beneficiary in a 12-month period. If you violate this rule, you get hit with federal income taxes and a 10% penalty on the accumulated earnings. Ouch!

The basic method for rolling over one account into another is to fill out a rollover contribution form with the 529 plan servicer you are transferring the money into. From there, the administrator of your preferred 529 plan will coordinate moving the money from the old fund into their fund.

Another method is to request a distribution of funds from the old servicer, and then, within 60 days, deposit the full amount into your preferred 529 plan. If you choose this approach, be sure to let your servicer know that the money is a rollover and give them a breakdown of how much is principal and how much is earnings.

There are a few circumstances where it may make sense to move your 529 plan funds into a different account. One scenario is the one I outlined with my son’s accounts – to make the most of the state tax deduction and to get lower cost investments. You might also want to move if your plan has performed poorly compared to other 529s and you expect the trend continue. Of course, we all know that past performance is no guarantee of future returns, but if most other plans are outpacing yours, you may consider a transfer.

You may also find that a plan is too restrictive. While federal regulations govern all plans, some plans choose to have other specific rules for their plans. One example is the provision that you cannot change the owner of the plan unless the original owner dies or becomes incapacitated. For a grandparent who sets up a 529 account with this provision and later chooses to let a parent manage the account, this can lead to frustration. But, a way to circumvent this provision would be to roll the account over to a new 529 plan that accepts owner changes.

While the 529 program was created specifically to help families save for college, the plans can now be used to pay for private school. The recently enacted GOP tax reform allows beneficiaries to use up to $10,000 in annual distributions from a 529 plan during grades K-12 for things like school tuition and books, in addition to later college expenses.

Before tax reform, 529 plans were a great tool. Now they’re even better. If you’re not taking advantage of this financial planning tool, it’s worth considering.

Disclosure: This information is provided to you as a resource for informational purposes only. It is being presented without consideration of the investment objectives, risk tolerance or financial circumstances of any specific investor and might not be suitable for all investors. Past performance is not indicative of future results. Investing involves risk including the possible loss of principal. This information is not intended to, and should not, form a primary basis for any investment decision that you may make. Always consult your own legal, tax or investment advisor before making any investment/tax/estate/financial planning considerations or decisions.

Next Up in Business

Mercy merger won’t affect Springfield, Urbana hospitals, officials say
Mercy merger won’t affect Springfield, Urbana hospitals, officials say

Mercy Health — Springfield’s largest employer — will merge with an East Coast hospital network to become one of the largest health systems in the U.S. The merger with Bon Secours Health system would include 43 hospitals and more than 10 million patient visits annually. The deal won’t affect local facilities, hospital officials...
Springfield Chamber opens annual expo to public, offers more exposure
Springfield Chamber opens annual expo to public, offers more exposure

The Chamber of Greater Springfield showed off Springfield’s best in business to a much bigger crowd than usual on Thursday. The chamber opened its annual business expo to the general public this year, a first for the organization. More than 30 Springfield-area businesses participated, with specializations running from restaurants to printing...
Financial experts say you should do these things with your tax refund
Financial experts say you should do these things with your tax refund

‘Tis the season for taxpayers to get a nice chunk of change back from the IRS. It’s tempting to spend it all, but financial experts say there are steps you should take to shore up your financial future.  Some who usually pay off debt will splurge this year. “I’m going to Japan in April so I’m actually going to add...
Target launches new home decor brand
Target launches new home decor brand

Target has released a new home decor brand that features dozens of bold colors, prints and textures. The chain’s newest home brand, Opalhouse, has more than 1,300 pieces of furniture for the home. The brand includes bedding, bath, décor, tabletop and furniture. Most pieces are priced under $30. Target has launched several new brands in...
Home Depot hiring for more than 200 jobs in Dayton region
Home Depot hiring for more than 200 jobs in Dayton region

The Home Depot is hiring 225 associates in Dayton and 80,000 associates nationwide. Interested applicants can apply online at, or job seekers can text HOMEDEPOT to 52270 and receive a link to apply to hourly positions in their area. Available positions vary by store. » TRENDING NEWS: #NationalChiliDay: These are the top...
More Stories