This post contains information about financial accounts. Please consult a qualified financial advisor for advice specific to your situation.
We’ve been stashing money in our kids’ 529 plans for years, birthday checks from grandma, tax refund scraps, that one bonus I convinced myself to save instead of spending on a couch we didn’t need. And the whole time, a tiny voice in the back of my head whispered: what if they don’t go to college? What if they get scholarships? What if this money just sits there, trapped, while we pay penalties to access it?
Starting in 2024, there’s finally an answer.
You can roll unused 529 funds into a Roth IRA for the beneficiary. No penalty. No income tax on the conversion. It’s the kind of news that made me actually read IRS guidance on a Saturday morning, which if you knew how I feel about Saturday mornings you’d understand is significant.
The Quick Answer on 529 to Roth IRA Rollovers
You can transfer up to $35,000 lifetime from a 529 plan to a Roth IRA for the beneficiary, but the 529 must have been open for at least 15 years and annual rollovers are capped at the yearly Roth IRA contribution limit which is $7,000 in 2024 and 2025. The beneficiary needs earned income equal to or greater than the rollover amount. That’s the headline. The details matter, though.
Why This Rule Changes Everything
Before this change, unused 529 money had two options, and neither felt great. You could withdraw the funds and pay income tax plus a 10% penalty on the earnings. Or you could change the beneficiary to another family member and hope they’d need the money for qualified education expenses. Both paths felt like losing.
You saved responsibly, got lucky with scholarships or a kid who chose trade school, and then got penalized for it.
The SECURE 2.0 Act, passed in late 2022, created this third path because Congress recognized that fear of overfunding kept some families from saving enough in 529 plans. This rollover option removes that hesitation. Save aggressively. If your kid doesn’t need all of it, they get a head start on retirement instead.
My oldest is eleven. College feels simultaneously far away and terrifyingly close. Knowing that overfunding isn’t a trap anymore lets me contribute without the constant mental math of “but what if she becomes a welder?” which honestly, welders make great money, we’d be thrilled.
The Rules You Actually Need to Know
Here’s where it gets specific. These aren’t suggestions.
The 15-Year Rule. The 529 account must have been open for at least 15 years before any rollover. Not 15 years of contributions. Fifteen years since the account was established. If you opened a 529 when your kid was three, they’ll be eighteen before you can roll anything over. This matters for timing, if you’re thinking about opening a 529 for a newborn partly as a Roth conversion vehicle down the road, start now, the clock begins ticking the day you establish the account.
The $35,000 Lifetime Cap. Total rollovers from 529 to Roth IRA cannot exceed $35,000 per beneficiary. Ever. This is a lifetime limit, not an annual one, and once you’ve moved $35,000 you’re done. Is $35,000 enough? For a young person starting a Roth at 18 or 22, that money has decades to compound. Assuming 7% average annual returns, $35,000 at age 22 becomes roughly $375,000 by age 65. Not a bad consolation prize.
The Annual Contribution Limit. You can’t dump the full $35,000 in one year. Rollovers are subject to annual Roth IRA contribution limits, which for 2024 and 2025 means $7,000 if you’re under 50. So the fastest you can move the full amount is five years.
The Earned Income Requirement. Here’s the catch that trips people up. The beneficiary must have earned income equal to or greater than the rollover amount, which means a 19-year-old with no job cannot receive a $7,000 rollover, but a 19-year-old who earned $4,500 at a summer job can receive up to $4,500. Your kid needs to work. Even a part-time gig that generates a few thousand dollars opens the door. Keep pay stubs. Document the income.
The Contribution Coordination Rule. 529 rollovers count toward the annual Roth IRA contribution limit. If your daughter earns $7,000 and you roll over $7,000 from her 529, she cannot also contribute $7,000 directly to her Roth that year. It’s one or the other.
The Five-Year Contribution Exclusion. Contributions made to the 529 within the last five years cannot be rolled over. Only money that’s been sitting in the account for at least five years qualifies, which prevents gaming the system by making a large contribution, waiting a few months, and converting it.
What This Looked Like for Us
We opened 529 accounts for both kids when they were born. My parents contributed, we contributed when we could, and the accounts grew slowly through market ups and downs. When the SECURE 2.0 provisions passed, I ran the numbers obsessively.
Our older daughter’s account will hit the 15-year mark when she’s fifteen. If she gets scholarships, goes to community college, or chooses a path that doesn’t require traditional four-year tuition, we’ll start rolling funds into a Roth for her at eighteen, assuming she has summer job income by then, which she will because I’ll make sure of it.
The mental shift was immediate. I stopped worrying about overfunding. I increased our monthly contribution by $50. That extra money either pays for her education or gives her a retirement head start, and both outcomes work.
How to Actually Do This
The mechanics aren’t complicated, but you’ll need to coordinate with your 529 plan administrator and whoever holds the Roth IRA.
First, verify the 529 age by logging into your account and confirming when it was established. You need documentation showing the account has existed for at least 15 years. Second, open a Roth IRA for the beneficiary if they don’t already have one, and custodial Roth IRAs work for minors with earned income, then once they turn 18 the account becomes theirs. Third, document earned income by keeping W-2s, pay stubs, or records of self-employment income because the rollover amount cannot exceed that year’s earned income. Fourth, request a direct trustee-to-trustee transfer by contacting your 529 administrator and requesting a rollover to the beneficiary’s Roth IRA, direct transfers avoid complications, don’t take a distribution and try to redeposit it yourself. Fifth, track your lifetime total because you’re responsible for tracking cumulative rollovers, the IRS doesn’t send reminders.
Who Benefits Most
This rollover option isn’t for everyone.
Families who saved aggressively benefit most, the ones who funded 529 plans heavily and whose child received scholarships, chose less expensive schools, or skipped traditional college entirely. Children of savers with long time horizons benefit, because a 529 opened at birth reaches the 15-year threshold when the child is fifteen, and by eighteen rollovers can begin, and by twenty-three the full $35,000 could be transferred if earned income allows.
Parents nervous about overfunding benefit because this rule removes the barrier that kept contributions conservative. Families with multiple 529 beneficiaries benefit because changing beneficiaries between siblings remains an option, but knowing each child could eventually receive up to $35,000 toward retirement adds flexibility.
Common Questions
Can I roll my own 529 into my Roth IRA? Only if you’re the beneficiary of the 529. Most 529 plans have a parent as owner and child as beneficiary. The rollover goes to the beneficiary’s Roth IRA, not the owner’s.
Do I pay taxes on the rollover? No. Qualified rollovers are not taxable income.
Can I roll over 529 earnings or just contributions? Both. The rollover includes principal and earnings, though contributions from the last five years are excluded.
What if my 529 plan state doesn’t recognize this? The federal rules apply regardless of state, but some states offered tax deductions for 529 contributions, so check whether your state requires recapture of those deductions if funds are rolled over instead of used for education.
Is there an age limit for the beneficiary? No maximum age. The beneficiary could be 25 or 55, as long as they have earned income and meet all other requirements.
Last updated: December 2025. Tax rules change. Verify current limits and requirements with a financial professional before making decisions about your accounts.
