Turning College Savings into Retirement Wealth: 529-to Roth IRA Transfers Under SECURE 2.0
Under the SECURE 2.0 Act of 2022, families now have a new planning strategy for unused 529 college savings plan assets: rollovers to Roth IRAs—without taxes or penalties.
This rule, effective in 2024, helps address a common concern: “What happens if my child doesn’t use all the 529 funds?” With this provision, long-term 529 savings can now potentially jump-start retirement savings for the 529 beneficiary.
🧾 What Is the SECURE 2.0 529-to-Roth IRA Provision?
This rule allows a tax-free, penalty-free rollover of 529 Plan assets into a Roth IRA for the plan’s named beneficiary, subject to specific IRS requirements.
This option can be a valuable tool for:
✅ Key Eligibility Rules (as of 2025)
| Requirement | Summary |
|---|---|
Account Age | 529 plan must have been opened at least 15 years ago |
Contribution Age | Funds being transferred must have been in the account for at least 5 years |
Beneficiary | Roth IRA must be in the name of the 529 plan beneficiary |
Earned Income | Beneficiary must have earned income equal to or more than the amount transferred |
Annual Limits | Rollovers count toward the annual IRA contribution limit ($7,000 for 2025 if under 50) |
Lifetime Cap | Maximum of $35,000 may be rolled over per beneficiary, over their lifetime |
No Income Limits | Unlike standard Roth contributions, no income limit applies for this rollover |
⚠️ Changing the beneficiary of a 529 may restart the 15-year clock.
🔁 How the Rollover Process Works
Depending on the custodian of the 529 and the destination Roth IRA, the paperwork will vary. Here might be examples of documents you may need for rollovers from 529 Plans:
- If the Roth IRA exists: Complete the 529 to Roth IRA Investment Instructions Form
- If the Roth IRA does not exist: Complete a Traditional/Roth IRA Application plus investment instructions
- Submit a Custodian-Specific Distribution Request with a signature guarantee, or
- Use the receiving custodian’s rollover form with an acceptance signature
🧠 Important Considerations
- Each rollover must be carefully tracked to comply with IRS holding and contribution limits.
- Rollover amounts reduce the beneficiary’s annual Roth contribution space.
- A tax professional should confirm eligibility—the IRS has final authority on compliance.
📌 Final Thoughts
The 529-to-Roth IRA transfer provision of SECURE 2.0 gives families new flexibility and helps turn unused education savings into long-term retirement assets. Whether you're planning ahead or reassessing old 529 funds, this strategy can enhance your family's overall financial plan.
Have questions or want to review your situation? Connect with the McFee Financial Group team, we’re here to help!
*Investors should consider the investment objectives, risks, charges and expenses associated with municipal fund securities before investing. This information is found in the issuer's official statement and should be read carefully before investing.
*Investors should also consider whether the investor’s or beneficiary’s home state offers any state tax or other benefits available only from that state’s 529 Plan. Any state-based benefit should be one of many appropriately weighted factors in making an investment decision. The investor should consult their financial or tax advisor before investment in any state's 529 Plan.