Can a portion of my 403(b) be rolled over to fund a 529 plan for my granddaughter? If not what is the best way to move the money to minimize tax consequences?
No, money cannot be rolled over from a 403(b) plan to a 529 plan. You generally cannot take a distribution from your 403(b) plan unless you leave your district or have reached age 59½. 403(b) plans are designed specifically for retirement savings, so there are severe restrictions on making withdrawals from the account.
You may establish a 529 plan in addition to your 403(b) plan. Your earnings grow income-tax deferred in a 529 plan, and the money is also free from federal income tax when it’s used to pay for qualified higher education expenses.*
* Withdrawals for nonqualified expenses are subject to income tax and a 10% tax penalty.
Back to FAQs