The central benefits of 529 plans, which were born out of Section 529 of the Internal Revenue Code, are tax-free investing and distributions for qualified education expenses. Additionally, account owners can have distributions up to $20,000 per child per year for qualified K-12 education expenses and the cost of apprenticeship programs, and up to $10,000 for qualified student loan repayments per beneficiary (lifetime limit). Qualified K-12 education expenses include tuition, curriculum materials, books and other instructional materials, online educational materials, standardized testing fees, tutoring, dual-enrollment fees, and certain educational therapies for students with disabilities.
Qualified expenses for 529 plans have also expanded to include certain recognized postsecondary credentialing programs, licensing programs, and industry-recognized certification programs, along with related books, fees, supplies, equipment, continuing education, and required examinations.1 These changes broaden the use of 529 assets beyond traditional four-year college programs and may benefit beneficiaries pursuing technical, vocational, or continuing education opportunities.
Nearly every state and the District of Columbia offer a 529 plan, though individuals are not limited to their state of residency’s plan and can contribute to any. If your state’s plan does not offer a meaningful tax deduction or tax credit for 529 plan contributions, consider others that may feature low fees and a broad range of investment options.
A provision of the Setting Every Community Up for Retirement Enhancement (SECURE) Act 2.0 allows beneficiaries to roll over funds from a 529 plan to Roth IRA accounts without facing the usual 10% penalty for nonqualified withdrawals or generating taxable income.
Rollovers from 529 Plans to Roth IRAs
Account owners could always change the beneficiary of 529 plans to a family member of the beneficiary, but being able to transfer funds to a Roth IRA further alleviates concerns that money allocated in these accounts will be “trapped” if they aren’t used for education. The change is meant to encourage greater savings for both education and retirement.
There are several requirements and limits in this new provision, and most importantly, the rollover must be to the Roth IRA of the 529 account beneficiary, not to the Roth IRA of the 529 account owner. Investors should consult a qualified tax advisor before changing beneficiaries, as certain beneficiary changes could affect eligibility requirements, including the 15-year holding period.2
Key Requirements & Limits
In addition, all the normal Roth IRA rules would apply to the account.
Additional Planning Flexibility
Families may also be able to roll over 529 plan assets tax-free into ABLE accounts for beneficiaries with disabilities or certain qualifying family members, subject to annual contribution limits and other eligibility requirements.3 Recent legislation made permanent the ability to complete qualifying 529-to-ABLE rollovers. ABLE accounts are tax-advantaged savings accounts designed to help individuals with disabilities save for qualified disability expenses while maintaining eligibility for certain public benefits.
In addition, 529 plans may provide estate-planning benefits. Contributions are generally considered completed gifts for federal gift tax purposes, and account owners may elect to front-load up to five years of annual exclusion gifts into a 529 plan contribution while retaining control over the account assets.
Applicable Roth IRA Rules
- Contribution Limits
Normal Roth IRA contribution limits would apply ($7,500 for individuals under age 50 and $8,600 for individuals age 50 or older in 2026, including the $1,100 catch-up contribution), and the annual amount eligible for rollover would be reduced by any traditional or Roth IRA contributions made during the same year. - Income Requirements
The beneficiary must have earned income equal to at least as much as the amount transferred into the Roth IRA from the 529 plan in that year. - Taxes and Penalties
Earnings and contributions would be treated like any other Roth account or rollover, meaning they grow tax-free and are distributed tax-free for eligible distributions.
The IRS is expected to issue additional guidance that may impact 529 plan account rollovers to Roth IRAs, including the above-mentioned conditions.
State tax treatment of rollovers from 529 plans to Roth IRAs varies by state, and you should consult with a qualified tax advisor before taking any such actions.
Account owners are responsible for determining the eligibility of a 529 plan for Roth IRA rollover, including tracking and documenting the length of time the 529 plan account has been open and the amount of assets in your 529 plan account eligible to be rolled into a Roth IRA.
To request a rollover to a Roth IRA, contact the Roth IRA administrator to determine their ability and requirements to receive the rollover, and contact the 529 plan administrator to submit any required forms.
Please reach out to your advisor if we can help provide additional information about education savings, retirement planning, or strategies involving 529 and ABLE accounts.
1. 529 Plans: Questions and answers | Internal Revenue Service. (n.d.). Retrieved May 11, 2026, from https://www.irs.gov/newsroom/529-plans-questions-and-answers
2. MEFA. (2024, November 7). The Details on Transferring 529 Funds into a Roth IRA. mefa.org. https://www.mefa.org/article/the-details-on-transferring-529-funds-into-a-roth-ira/
3. ABLE accounts – Tax benefit for people with disabilities | Internal Revenue Service. (n.d.). Retrieved May 11, 2026, from https://www.irs.gov/government-entities/federal-state-local-governments/able-accounts-tax-benefit-for-people-with-disabilities
