Rolling Savings Bonds Into a 529 Plan

Page content

Rolling Savings Bonds into a 529 Plan

Rolling savings bonds into a 529 plan may be a good option for you. If you purchased savings bonds to pay for your child’s education, then you may want to roll them over into a 529 plan because the 529 plans tend to earn more interest over time, which will make your investments much more effective. It is important to realize that 529 plans do carry risk, since they are based in the stock market, while savings bonds are guaranteed and you will not lose your original investment.

Rolling savings bonds into a 529 plan is a simple process. You need to take the bonds to the bank and cash them in. Then you need to put all of the money into your 529 plan. Since both can be used to save for college tax free, you can roll the savings bonds over without paying taxes on the money. When you file your taxes you will need to fill out Form 8815 to avoid paying taxes on the money that you put in.

You are still subject to all the rules surrounding redeeming savings bonds. This means the bonds must be at least one year old, and you are limited to redeeming a $1000.00 at a time to avoid filling out paperwork and having a check mailed to you at a later date. You will still be required to fill out the interest form at the bank and receive a 1099 INT form, but the IRS Form 8815 will cancel out the taxes you have to pay. Rolling savings bands into a 529 plan can allow you to free up some money in your budget, but sill increase your college savings account.

Additionally you are still limited on the amount you can contribute to your 529 plan each year, and must still follow the guidelines set forth by your state government. You should also understand any fees and withdrawal limitations that are associated with your particular plan.