Turn leftover college savings into retirement savings, the SECURE 2.0 way
| Year | Beneficiary Age | Rollover ($) | $35k Cap Remaining | 529 Balance After |
|---|
| Rule | Requirement |
|---|---|
| Lifetime cap | $35,000 per beneficiary, across all 529 accounts |
| Account age | 529 open at least 15 years before the rollover year |
| Recent contributions | Nothing contributed in the prior 5 years (or its earnings) can move |
| Annual limit | Rollover counts against the IRA limit: $7,500 in 2026, $7,000 in 2025, plus catch-up where allowed |
| Earned income | Beneficiary needs wages (or self-employment income) at least equal to the rollover |
| Income caps | None. No MAGI phase-out applies to rollovers |
| Destination | Must land in a Roth IRA owned by the 529 beneficiary, via direct trustee-to-trustee transfer |
| Availability | Rollovers allowed for distributions after December 31, 2023 |
Rules from SECURE 2.0 §126 (IRC 529(c)(3)(B)(ii)) and IRS rollover guidance. Some custodians began accepting these transfers in 2024; a few still haven't built the pipeline, so ask before you count on a specific January date.
Leftover 529 money used to be a problem with only awkward solutions: change the beneficiary, save it for a grandchild, or withdraw it and eat the penalty. Starting in 2024, SECURE 2.0 added a cleaner exit. Up to $35,000 per beneficiary can shift into their own Roth IRA, where it compounds tax-free forever. The catch is patience: each year's transfer is capped by that year's IRA contribution limit, so draining a full $35,000 takes years of scheduled rollovers.
Each rollover year, the movable amount is the smallest of four numbers: the IRA annual limit minus planned regular contributions, the beneficiary's earned income, the remaining lifetime cap, and whatever is left in the 529. The schedule repeats until one of those buckets runs dry. The lifetime cap applies across all 529s for that beneficiary, so enter any prior rollovers to get an honest remaining cap.
Enter the balance and the year the account was opened, since the 15-year clock is the first gate. Add the beneficiary's expected earned income and any regular Roth contributions they plan to make, because both shrink the rollover headroom. The age-50 catch-up checkbox adds $1,100 for 2026; custodians disagree on whether it applies to rollovers, so leave it off unless yours confirms.
Imagine a $42,000 529 opened in 2009 for a daughter who graduated with money to spare. She's 22 in 2026, earning $30,000, and not contributing to a Roth on her own. The account clears the 15-year test (17 years old). Each year she can roll $7,500: that's the 2026 IRA limit, well under her $30,000 of wages, with no regular contributions competing for space. The schedule runs 2026 through 2029 at $7,500 each, then a final $5,000 in 2030. Five years, $35,000 moved, and $7,000 stays behind, still available for grad school, her sibling's $10,000 of loans, or a future grandchild.
Flip the inputs to a $12,000 balance and the same plan finishes in 2 years: $7,500 then $4,500. Small balances don't need the full runway.
Up to $35,000 lifetime per beneficiary, and no more than the IRA annual contribution limit in any single year: $7,500 in 2026, plus the $1,100 catch-up if the beneficiary is 50 or older and the custodian allows it for rollovers. A rollover also has to fit inside the beneficiary's earned income for the year, after subtracting any regular contributions they plan to make.
Four main ones. The 529 account must have been open at least 15 years. Contributions made in the five years before the rollover (and their earnings) can't move. The Roth IRA must belong to the same person who is the 529 beneficiary. And the transfer must be direct, trustee to trustee. Rollovers started with distributions after December 31, 2023.
No. Neither the contributions nor the earnings pay tax or the 10% penalty when they move, as long as the rules are followed. Once in the Roth, the money follows regular Roth rules: contributions can come out anytime, and earnings become tax-free after age 59 and a half and the five-year clock.
No MAGI phase-out applies, which is the strange and wonderful part: this is one Roth contribution route that works at any income. The beneficiary does need earned income at least equal to the rollover amount, since the rollover claims space in that year's IRA contribution limit.
It stays in the 529. It can keep paying qualified education expenses, including up to $10,000 of student loans, or fund a future grandchild once the beneficiary has children of their own. Changing the beneficiary to a younger generation resets the 15-year clock, so plan the timeline before rearranging accounts.
This calculator summarizes federal rules for planning purposes. It is general information, not tax, legal, or investment advice. Custodian mechanics and state treatment vary, so confirm the specifics with your plan administrator or a tax professional.