Roll Over Excess 529 Funds to a Roth IRA

Starting in 2024, 529 educational savings plans will become even more attractive with enhanced tax benefits. If your student receives scholarships or joins the military, there is a new option for handling excess 529 plan funds.


The SECURE Act 2.0, which became law late in 2022, enables 529 beneficiaries to place unused 529 funds into their Roth IRA – without penalty. Understand that the rollover can only be made to the 529 beneficiary’s Roth IRA – not a parent’s Roth IRA.

This new rule can have an incredible impact on the student’s ability to successfully fund a comfortable retirement, thanks to the power of compound interest.


You still have the option of changing a 529 plan beneficiary to another qualifying family member. But the funds would have to be used for educational purposes. Alternatively, you could withdraw excess funds and pay a 10% penalty.


As with most tax laws, numerous rules govern a 529 plan to Roth IRA rollover. Keep these in mind:

  • A max of $35,000 can be rolled over from a 529 plan to a beneficiary’s Roth IRA.
  • Annual Roth IRA contribution limits apply to rollovers. (For example, if this law was already in effect, the 2023 ROTH IRA contribution limit is $6,500, which means it would take six years to convert $35,000 from a 529 plan to a Roth IRA).
  • Conversions can only be made to a beneficiary’s Roth IRA; a parent saving with a 529 plan in a child’s name cannot convert unused funds back into their own retirement account.
  • Rollovers are not allowed until a 529 account has been open for at least 15 years.
  • Funds you convert from 529 plans to Roth IRAs must have been in the account for at least five years.

Consult your tax professional to learn more.