How Advisors Can Help Turn 529s Into Roth IRAs
A new law under the Secure 2.0 Act will allow unused savings from 529 education investment funds to be transferred to a Roth IRA tax-free.

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Advisors always tell clients looking to save for retirement to “start while you’re young.” Now, there’s an easier way to do that.
This year, under the SECURE 2.0 Act, unused savings from 529 plans — designed for college, K-12, and apprenticeship programs — can transfer to a Roth IRA tax-free, up to a certain point. Roughly 4 in 10 students graduate from a four-year public college without any debt, and 35% of parents say their children might skip college entirely, so rollovers can significantly benefit younger generations as they start saving for retirement.
“It’s understandable that [parents] might be wary about the tax implications of needing to withdraw those funds if they’re not used for education,” said Tony Durkan, head of 529 relationship management at Fidelity Investments. “These new legislative changes remove some of that worry while also providing the opportunity to give beneficiaries a leg-up on their retirement savings.”
Sit, Stay, Roll Over
Beneficiaries of 529 plans might have remaining funds due to lower tuition costs, scholarships, or not attending college. However, the SECURE 2.0 Act has a few stipulations for that money to roll over into a Roth IRA:
- Rollovers will only be eligible from 529 plans that have been open for at least 15 years, and they can’t come from contributions added in the last five years.
- The tax-free rollover limit tops out at $35,000, and the Roth IRA has to be tied to the beneficiary of the 529 plan.
The Internal Revenue Service still needs to clarify some details, especially regarding whether the 15-year rule resets if the 529 beneficiary changes. “Given this is newer legislation, how individual states interpret and operationalize changes may vary, so it’s important to check the rules of your state,” said Smitha Walling, head of education savings at Vanguard.
Keep in Mind. The SECURE 2.0 Act says rollovers will adhere to Roth IRA contributions rules and limits, which are set at $7,000 for those under the age of 50 this year. Also, original 529 contributions can be withdrawn tax- and penalty-free, but earnings are subject to taxes and a 10% penalty if they don’t go toward qualified educational expenses, according to the IRS. Some states have their own additional taxes as well.