Convert IRA to 529 for college expenses?

At Bankrate we strive to help you make smarter financial decisions. While we adhere to strict , this post may contain references to products from our partners. Here’s an explanation for

Dear Dr. Don,
I have an IRA account. Can I convert it to a Section 529 plan and use it for my child’s college expenses?
— Marty Matriculate

Dear Marty,
No conversion opportunities exist. You can either take advantage of the ability to take distributions from the IRA for qualified higher education expenses, and by doing so avoiding the 10 percent early distribution penalty, or cash out the IRA, pay the taxes and put the money to work in a Section 529 college savings plan.

While the IRA account balance doesn’t influence financial aid, there are some financial aid implications in using distributions out of the IRA to fund college expenses. That’s because the distributions will show up as income on the student’s Free Application for Federal Student Aid, or FAFSA. Timing is everything here. When your child is a college senior, there are no more FAFSAs to fill out, and the income from the IRA distribution won’t hurt his or her undergraduate financial aid. The key here is to match the year of the expense with the year of the distribution.

Get more news, money-saving tips and expert advice by signing up for a free Bankrate newsletter.

Ask the adviser

To ask a question of Dr. Don, go to the “Ask the Experts” page, and select one of these topics: “Financing a home,” “Saving & Investing” or “Money.” Read more Dr. Don columns for additional personal finance advice.

Bankrate’s content, including the guidance of its advice-and-expert columns and this website, is intended only to assist you with financial decisions. The content is broad in scope and does not consider your personal financial situation. Bankrate recommends that you seek the advice of advisers who are fully aware of your individual circumstances before making any final decisions or implementing any financial strategy. Please remember that your use of this website is governed by Bankrate’s Terms of Use.