529-to-Roth rollover
529 to Roth IRA rolloverA 529-to-Roth rollover is a transfer from a 529 plan straight into a Roth IRA of the 529's own beneficiary, allowed by Section 529(c)(3)(E) of the US tax code. A transfer that meets its conditions owes no federal income tax, and the total moved this way for one beneficiary is capped at $35,000.
What is a 529-to-Roth rollover?
The conditions are in the statute. The 529 has to have been maintained for the 15 years ending on the day of the transfer. The amount can't exceed the contributions made before the five-year period ending that day, plus the earnings on them. The money has to go directly from the plan's trustee to the trustee of a Roth IRA held for the 529's beneficiary.
Two limits bound the amount. In a year, the rollover can't exceed the year's IRA dollar limit, reduced by the beneficiary's other IRA contributions that year, so it shares that room with their own contributions. Across all years, the rollovers for one beneficiary can't exceed $35,000. The income test that phases out direct Roth IRA contributions does not reduce this rollover.
Money left in a 529 has other exits too. The beneficiary can be changed to a member of their family, and money can move within 60 days to another family member's 529, neither of them subject to federal income tax. A withdrawal for anything else makes the earnings in it taxable income, plus a 10% additional tax unless one of the statute's exceptions applies.
How a 529-to-Roth rollover works, with numbers
A 529 was opened for a beneficiary 17 years ago and holds $12,000. Nothing has been withdrawn from it and nothing has been rolled over from it before. $8,000 was contributed more than five years ago and has earned $1,800; $2,000 was contributed within the last five years and has earned $200.
The statute counts the older contributions and their earnings, so up to $9,800 can be rolled over. That is well inside the $35,000 lifetime cap, which is untouched. The year's limit decides how much of it moves in any one year.
- Contributed more than five years ago
- $8,000
- Earnings on those contributions
- + $1,800
- Can be rolled over
- $9,800
Why a 529-to-Roth rollover matters
Money a 529 no longer needs can land in the beneficiary's retirement savings instead, without the federal income tax and the 10% additional tax a non-qualified withdrawal carries. The amount it can take is set by dates and limits: it can't go before the account is 15 years old, and it can take only contributions made before the five-year period ending on the transfer date, with their earnings, and a year's rollover uses up that year's Roth contribution room for the beneficiary.
The cap is per beneficiary, across every year, so any part of a balance beyond what is left under it can't use this route.
529-to-Roth rollover in Taiga Finance
Taiga Finance's “College savings” planner shows “Leftover after college” in the working behind “College cost covered”: what is projected to remain across the accounts and savings funds linked to a child after the last college year, for one beneficiary or, with more than one, for everyone together. The projection keeps growing what is left at the planner's “Nominal annual return” through the college years. Only the part of it held in a 529 can go to a Roth IRA by rollover, and only within the conditions above.
The college savings calculator →Key takeaways: 529-to-Roth rollover
- A 529-to-Roth rollover moves 529 money directly into the beneficiary's own Roth IRA without federal income tax, under Section 529(c)(3)(E).
- The 529 must have been maintained for 15 years, and only contributions made before the five-year period ending on the transfer date, plus their earnings, can be rolled over.
- A year's rollover can't exceed the year's IRA dollar limit, reduced by the beneficiary's other IRA contributions that year.
- The lifetime total for one beneficiary is $35,000.
Questions about 529-to-Roth rollover
Can leftover 529 money go to a Roth IRA?
Yes, under conditions set in Section 529(c)(3)(E). The 529 must have been maintained for 15 years, the money must come from contributions made more than five years earlier and their earnings, it must move trustee to trustee into the beneficiary's own Roth IRA, and it counts against the beneficiary's Roth contribution limit for the year. The lifetime total is $35,000 per beneficiary.
What is a 529-to-Roth rollover?
A direct transfer from a 529 plan into a Roth IRA held by the 529's beneficiary. When it meets the statute's conditions, it owes no federal income tax and carries no 10% additional tax.
What happens to unused 529 funds?
The beneficiary can be changed to a family member without federal income tax, the money can move to a family member's 529, it can roll to the beneficiary's Roth IRA under the rollover rules, or it can be withdrawn, with the earnings taxed and, outside the statute's exceptions, a 10% additional tax.
Does Taiga Finance show what will be left after college?
Yes. The College savings planner shows Leftover after college, the projected balance across a child's linked accounts and savings funds after the last college year, per child or, with more than one child, for everyone together.