Transfer 529 to Roth IRA?

Transfer 529 to Roth IRA?

Is this even possible?  This is so new, it took over a year for the IRS to translate what this means.
While the ink is not even dry (always subject to IRS changes), this could be a useful tool – for some!

Key points:

• Up to $35,000 can be transferred from a 529 plan to a Roth IRA for the same beneficiary.

• The 529 must be open for at least 15 years, and each rollover is limited to the annual Roth IRA contribution cap.

• Only contributions made at least five years earlier qualify for rollover.

• Eligibility may be limited by earned income, prior IRA contributions, or Roth income thresholds.

This video explains the new rules allowing unused 529 plan funds to be transferred to a Roth IRA for the beneficiary.

Under the Secure 2.0 Act, up to a lifetime limit of $35,000 can be moved from a 529 account to a Roth IRA, subject to several restrictions.

The 529 plan must have been open for at least 15 years, transfers are limited to the annual Roth IRA contribution limit, and only contributions older than five years qualify.

The rollover must be made into a Roth IRA owned by the same beneficiary listed on the 529 plan. Income requirements, existing IRA contributions, and potential Roth contribution limits may restrict eligibility.

This rule may reduce taxes and penalties associated with non-qualified 529 withdrawals when educational expenses are not incurred due to scholarships, lower-cost schools, or a decision not to attend college.

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Transfer 529 to Roth IRA? Transcript

Transcript for “Transfer 529 to Roth IRA” video  11/21/2025

We’ve had some questions and discussions recently about the, uh, ability to move money from a 529 to a Roth IRA, and we wanted to put together a quick video to talk about this

So it’s true… you can take some leftover money, some unused money …in a 529 plan, and now transfer this to a Roth IRA.

Sounds great.

Now, there are some limitations on this.

You can transfer up to a lifetime limit of $35,000 to a Roth IRA for the beneficiary.

The beneficiary is the student named on the 529 plan.

This rule can help these students possibly avoid taxes and penalties for what might normally might be considered a non-qualified withdrawal.

Now, why would someone be in a situation like this? Where there is left over dollars in a 529 account?

Suppose the beneficiary (the student) decided not to go to college.

Or they may not need the money if they got a scholarship.

Or may not need it if they have some other financial aid that’s coming in.

Or perhaps they may go to a school that’s not as expensive.

The money left in their 529 accounts might now be used to give these students a boost towards their retirement as well.

Under certain conditions, you can roll over tax free – and penalty free – up to a lifetime limit of $35,000 in a 529 account.

You need to know that the 529 plan must have been maintained for this student for at least 15 years!

So it’s not something that you’re going to open up this year and roll over to a Roth next year.

This was created by the Secure 2.0 Act, which was passed at the end of 2022.

And quite frankly, it took most CFP’s and CPAs over a year to translate what this actually meant.

If you do take the money out – but don’t roll it into a Roth IRA, you could be subject to paying income tax and a 10% federal tax penalty on any earnings associated with the distribution.

That’s where transferring to a Roth might make a lot of sense.

However, there’s a couple of things that you should know.

The 529 plan has to be maintained for this beneficiary, for this particular student, for at least 15 years.

The Roth IRA has to be in the name of that designated beneficiary, the student. It can’t be you, or anyone else, it has to be the same person (the student).

The amount transferred from a 529 account to a Roth IRA can’t exceed the Roth IRA annual contribution limit. Right now that’s $7,000,

Meaning, you can do this $7,000 rollover FIVE times, adding up to $35,000.

Additionally. The transfer has to come from contributions made to the 529 account at least five years prior to the transfer date.

I’ll also mention that typically Roth. IRA contributions are subject to modified adjusted gross income limitations (MAGI).

We did a video on this recently which I’ll link to, in the show notes.

But it’s not clear from the IRS, at least at the time of this recording, in November of 2025 whether this “529 to Roth” rollover is subject to modified adjusted gross income limits.

So there may be instances where the beneficiary is NOT eligible to transfer the full amount of the Roth contribution, that $7,000 from the 529 into a Roth

That may be because they didn’t have enough income. You need earned income to make a Roth Contribution.

If they didn’t make 7,000, then they are not eligible to put $7,000 into a Roth IRA.

Maybe they didn’t make enough money in that calendar year for them to make a $7,000 Roth contribution.

Or maybe they made a Roth contribution already, in that calendar year.

Also if they put money into a traditional IRA, same thing. You can’t, you can’t do that and roll over money from a 529 during the same year.

Or perhaps they had a year where they just made too much income and now they are no longer eligible to contribute to a Roth.

As of now, 529 plans have been around for 30 years. This is part of the number one topic, number one question we have been getting. What if junior decides not to go to college?

Now, some of this money can be directed toward their retirement. It’s worth considering.

There’s a lot more to discuss when it comes to 529 plans. A lot of things I like, a lot I don’t like.
But this is a change that a lot of folks are just discovering.

Thank you for watching “Transfer 529 to Roth IRA”