The New 529 Plan to Roth IRA Under SECURE Act 2.0

The SECURE Act 2.0, set to take effect in 2024, introduces a groundbreaking provision that offers families a new way to manage their savings and investment strategies. One of the most notable changes is the ability to roll over funds from a 529 Plan to Roth IRA.

This provision comes as a relief to families who have concerns about their hard-earned savings being “trapped” in a 529 plan without a suitable beneficiary.

In this article, we’ll delve into the details of the 529-to-Roth IRA rollover SECURE Act 2.0 highlighting the rules, benefits, and considerations for making the most of this opportunity.

The New 529 Plan to Roth IRA Under SECURE Act 2.0

Understanding the 529 Plan to Roth IRA Rollover

The 529-to-Roth provision offers a powerful tool for managing educational savings. However, it’s crucial to grasp the key points:

Effective in 2024:

The provision kicks in from 2024, allowing families to take advantage of the rollover option.

15-Year Rule:

To qualify for this rollover, this plan must be open for at least 15 years. This rule ensures that it’s a long-term savings vehicle.

$35,000 Lifetime Limit:

Families can transfer up to $35,000 per beneficiary to a Roth IRA over their lifetime, providing ample flexibility.

Roth IRA Ownership:

The Roth IRA must be in the name of the beneficiary of the 529 plan, enhancing the beneficiary’s control.

Exclusion of Recent Contributions:

Any contributions made within the past five years, and earnings on those contributions, are ineligible to be moved into the Roth IRA. This rule ensures that recent contributions remain in the 529 plan.

    Making the Most of Your 529 Plan

    Maximizing Educational Savings

    Before we get into the details of the 529-to-Roth rollover, let’s explore the full potential of your plan. These plans are designed to help families save for educational expenses. Here are some ways you can leverage this savings tool:

    Tax-Free Growth:

    This plan offers tax-free growth on your contributions, allowing you to save more efficiently.

    Eligible Educational Expenses:

    These plans can be used for a wide range of educational expenses, including tuition, fees, books, supplies, and certain room and board costs.

    Room and Board:

    If the student is enrolled at least half-time, room and board expenses are eligible. For off-campus students, you can use these funds for rent and groceries.

    Student Loan Debt:

    Up to $10,000 can be used to pay student loan debt for the beneficiary, siblings, and step-siblings.

    K-12 Tuition:

    Families can use up to $10,000 per year for K-12 tuition, although state-level rules may apply.

    Graduate School:

    529 funds can also be used for graduate school, providing flexibility for advanced education.

    Changing Beneficiaries:

    You can change the beneficiary to other family members without tax consequences, expanding your options.

      The SECURE Act 2.0: A Game Changer

      The SECURE Act 2.0 addresses concerns that have been raised by families who’ve saved diligently in this plans. Here’s how it helps:

      Preventing “Trapped” Funds:

      Families were hesitant to overfund 529 plans due to concerns about penalties for nonqualified withdrawals. This Act 2.0 ensures that leftover funds don’t go to waste.

      Beneficiary Change:

      Families can now transfer unused funds directly to a Roth IRA without penalties or recognition of taxable income, providing a more flexible solution.

      Eligible Family Members:

      The beneficiary change can be made to eligible family members, ensuring that the funds stay within the family.

      Caveats and Rules:

      There are specific rules and limitations, including the 15-year rule, the five-year rule, and annual IRA contribution limits.

      No Income Limitations:

      Unlike traditional Roth IRA contributions, the rollover contributions are not subject to income limits.


        The 529-to-Roth IRA under the SECURE Act 2.0 opens up new horizons for families who’ve diligently saved for educational expenses. This provision empowers families to make the most of their savings, address concerns about trapped funds, and enjoy the benefits of tax-free growth.

        By understanding the rules and optimizing your 529, you can maximize your savings and financial planning for education and beyond. Plan wisely, leverage the opportunities, and secure your family’s financial future.

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