529 plan into an IRA?

Taxes
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Hello! When I was very small, my grandparents paid some money into a 529 education trust for me (this is/was the MET plan if anyone is familiar with that). I was told that this was explicitly and exclusively for graduate school (there is no such stipulation in the Actual Trust that I am aware of, so I paid for undergrad myself + some scholarships, but whatever!), but I now have a full ride scholarship to grad school and Literally Don’t Need It. I believe there are two options for it now:

  • give it to another immediate family member who is interested in going back to school (there is nobody in my family who is doing that)
  • transfer it to an IRA

The Thing about an IRA is that 1) I don’t know anything about them and 2) I don’t Have A Job so I can’t put money into it every month or whatever. Also, I think there are different types of IRAs? help me I’m very lost and I don’t really even understand what an IRA is or does.

if anyone has any advice/thoughts/comments/compliments and/or can tell me if I have committed fraud by Having a 529 and Receiving Scholarships, that would be great. (I emailed Someone at Some Point and they were like “you’re good don’t worry about it” but I do worry about it).

further information: I think the total value of the 529 is about $2,000* which is a little less than the amount I took out in student loans ($2750, which I will probably pay off this summer, but it was too much to put on a credit card), so it would be nice to just Have this money but also if it’s too complicated I am also in a fine place to just be like “that’s okay I don’t need that money”.

*or that’s the amount that my grandparents originally put in and now it’s some other amount? I don’t understand this and I hate it

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I saw some info about the 529->IRA transfer in the Secure 2.0 act, and assuming that’s what you’re thinking, of you’ve got some time since you couldn’t do it until at least 2024. And since it does require earned income, depending on your program it might even be later. Which is probably what I’d do if it was me (since it’s an investment account growing tax deferred that can then go straight into a Roth IRA), but if you’d rather not deal with it or have another use for the money now, you’ve got a couple other options

  • Use it to pay off your students loans. Most of what I know about this came from a couple coworkers since it only went into effect a couple years ago (the secure 1.0 act, maybe?) and I’m pretty sure there’s a max limit, but I’m also pretty sure it’s well above the $2000 you mentioned
  • Assuming your scholarship is tax-free, you can take the money out penalty free (pretty sure you still have to pay tax on earnings, but no 10% penalty) since you’re paying for school with a scholarship and that’s one of the ways you can get it back. The 529 Plan Scholarship Exception | Kiplinger
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Someone fact check me but: the laws around 529 reimbursements are not very strict and when I used mine there was no requirement that the educational expenses you were using it to pay for occurred in any particular year, just that you paid at least that much money on qualified educational expenses. So I cashed it out 3 years into grad school as a reimbursement for my undergrad expenses and the IRS didn’t notice/care.

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