Converting 529 Plans to Roth IRAs

Do you have money left over in a 529 account for your child? Maybe your oldest got a scholarship to college, or just didn’t need as much money as you had saved up. No matter the case, there are some interesting changes being made to 529 education savings accounts. On December 29, 2022, the Secure Act 2.0 became law, with several changes to retirement plans and other parts of the tax code. One of the more interesting provisions included for parents of college age kids is that starting in 2024, 529 education savings plans can now be converted to Roth IRAs.

There are some limitations you need to be aware of:

  • The 529 plan must be open for at least 15 years. One provision that’s not yet clear is whether a change of beneficiary restarts this 15-year clock. It doesn’t seem like that was Congress’s intent, but the text of the law isn’t clear. I believe the 15-year period can include transfers from one state to another.
  • Any contributions to the 529 plan within the last five years are ineligible for rollover.
  • The maximum amount that can be rolled over in any given year is the lesser of the beneficiary’s earned income or the annual IRA contribution limit. For example, in 2023, the maximum amount eligible for rollover would be $6,500. But if the beneficiary only had $5,000 in wages, that would be the limit of the conversion.
  • The lifetime maximum that can be rolled over to a Roth IRA is $35,000 per beneficiary. Not per plan, per beneficiary. That means that someone who is a beneficiary of multiple 529 plans could only roll over a total of $35,000 from all of the plans supporting them.
  • The rollover must go straight from the 529 plan to the IRA provider. In financial lingo, that means it must be a plan-to-plan or trustee-to-trustee transfer. If a check is sent to you from the 529 plan, it is considered a distribution and is not eligible for rollover.
  • Like most Roth conversions, there are no income limits. It doesn’t matter how much income the beneficiary has during a year; he or she can still do the rollover to a Roth IRA.

One of the main reasons that this provision was created was to help alleviate the concern of parents that money could become ‘stuck’ in a 529 plan if it was over-funded, or the child didn’t end up needing the funds.


We’re happy to answer any questions you have about our firm and our processes. Here are answers to some of the questions we receive most frequently.

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Advantages and Eligibility

One of the key advantages of a 529 plan is that it can be funded with significant gifts from parents or grandparents. The annual contribution limit to a 529 plan is the annual gift exclusion for the person doing the funding. In 2023, that’s $17,000 that can be added to the plan in a single year. In addition, there’s an option to put up to five years’ worth of gifts in all at once. For example, a grandmother could put up to ($17,000 x 5 =) $84,000 into a 529 plan at the birth of her new grandson. If she then lived for five years or more, these funds would be out of her estate and not subject to estate tax.

Most 529 beneficiaries are unlikely to have saved enough money in their plan (and then not spent it) to take advantage of this new feature, but there is a planning opportunity for parents who are able to fund a 529 plan AND who don’t need to use all of those funds for college. Assuming the 529 plan was opened when the child was born, at age 16 those funds become eligible for rollover to a Roth IRA. If the child has wages (from a summer job, for example), the 529 plan funds can be used to get an early head start on retirement savings.

In the past, the only option was to leave those funds in the 529 plan for future children of the beneficiary or take them out and pay taxes (and penalties) on any growth in those funds. This new provision gives us additional flexibility in how we deal with unused college savings. If you have any questions about what to do with your leftover 529 plans, talk to a Certified Financial Planner™ professional to see if the Roth conversion option is right for you.


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About Rick Brooks

Rick Brooks, CFA®, CFP® is a partner of Blankinship & Foster LLC and is the firm’s Chief Investment Officer. He is a lead advisor, counseling clients on all aspects of personal financial management. Rick serves on several boards. He is the Chairman of the Board of Girl Scouts San Diego, and also chairs the San Diego Foundation’s Professional Advisor Council. Rick and his family live in Mission Hills. Rick enjoys spending time with his family, theater, cooking, skiing, gaming and reading.

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