The SECURE 2.0 Act: Rolling 529 Funds into a Roth IRA, Step by Step

Every parent who opens a 529 plan eventually wonders what happens if their child doesn’t need all of it. Since January 1, 2024, there’s a new answer. Under the SECURE 2.0 Act, leftover 529 money can move into your child’s own Roth IRA free of federal income tax, up to $35,000 over your child’s lifetime, as long as a handful of strict rules are met, according to the IRS’s overview of qualified tuition programs.

Those rules are where families trip up. The 529 account has to be at least 15 years old, recent contributions can’t move, each year’s transfer is capped, and your child needs income from work to receive it. This guide walks through each rule, shows how to make the transfer step by step, and explains how to set up a young child’s 529 today so the option is there if you ever need it. For how a 529 stacks up against a custodial account, a Roth IRA, and a Trump Account, see Comparing Investment Accounts for Kids: 529 vs. UTMA vs. Roth IRA vs. 530A.

What the 529-to-Roth IRA rollover is

The rollover comes from Section 126 of the SECURE 2.0 Act, a retirement law signed on December 29, 2022. It added a special rollover to Section 529 of the tax code, the section that governs 529 plans, and it applies to money taken out after December 31, 2023, according to the text of Section 529.

Before the change, money pulled out of a 529 for anything other than qualified education costs was a nonqualified withdrawal. The earnings portion was taxed as income and generally owed an extra 10% federal tax penalty, as Saving for College explains in its guide to the rollover. Now some of that money has a better place to go: a Roth IRA, where it can keep growing for decades and, under the usual Roth rules, come out tax-free in retirement. The Custodial Roth IRA explains how those rules work, and The Complete Guide to 529 College Savings Plans covers the 529 side.

The catch is that the law fences the rollover in tightly. Here are the rules in one place.

The 15-year rule, and what might restart the clock

The law allows the rollover only from a 529 account “maintained for the 15-year period” ending on the date of the transfer. In practice, the account has to have been open for at least 15 years. A 529 opened when your child is born clears that bar around their 15th birthday; one opened at age 10 clears it at 25.

What the law doesn’t spell out is what keeps it the same account for those 15 years. Nearly three and a half years after the law passed, the IRS still hadn’t said whether changing the beneficiary restarts the clock, Andy Ives, an IRA analyst at Ed Slott and Company, wrote in The Slott Report. Until it does, he noted, advisors and account custodians have been telling families to leave the beneficiary as it is. Saving for College goes further, saying a beneficiary change will likely restart the 15 years.

Two other moves sit in the same gray zone. It’s also unclear whether rolling an account from one state’s 529 plan to another, or changing the account owner, affects the 15 years, according to T. Rowe Price’s guide to the rollover.

Until the IRS weighs in, the safe approach is simple. If you might roll an account into your child’s Roth IRA someday, keep that child as the beneficiary and keep the account where it is. And if you have more than one child, give each one their own 529 instead of planning to pass a single account down the line.

The five-year rule for recent contributions

Only seasoned money can move. A rollover can’t include contributions made in the five years before the transfer, or the earnings on them, under Section 529. Contributions made before that, along with everything they’ve earned, are eligible no matter when the earnings came in, according to Vanguard’s guide to 529-to-Roth rollovers.

Here’s how that plays out. Say an account holds contributions made more than five years ago that have grown to $30,000, and a grandparent added $3,000 last year. The $30,000 can move, subject to the yearly limits below. The $3,000 gift and its growth have to wait until they’ve been in the account for five years.

The rule matters most for families still adding money in the high school and college years, sometimes to collect a state tax deduction. Those deposits won’t be eligible for a rollover until five years after they go in.

Keep your own records of when money went in. Many 529 plans report withdrawals as a blend of contributions and earnings rather than tracking which deposit they came from, so you may need your own records to show the money you’re moving is old enough, Vanguard notes.

The yearly limit and the $35,000 cap

Several limits decide how much can move in a given year, and the smallest one wins:

• The yearly IRA limit. Each year’s rollover counts toward the beneficiary’s IRA contribution limit, which the IRS set at $7,500 for 2026 in its announcement of the 2026 limits, with an extra $1,100 for people 50 and older. Any other contributions the beneficiary makes to a traditional or Roth IRA for the year shrink the room dollar for dollar, under Section 529.
• Earned income. The beneficiary has to earn at least as much as the rollover, through wages, tips, or self-employment, for example. If they earn $4,000, they can roll over $4,000, even though the limit is $7,500, Saving for College notes. What Qualifies as “Earned Income” for a Minor’s Roth IRA? covers what counts.
• The $35,000 lifetime cap. All rollovers for one beneficiary, from every 529 account, can’t add up to more than $35,000. Unlike the yearly limit, the cap isn’t adjusted for inflation, Vanguard notes.

At $7,500 a year, moving the full $35,000 takes at least five years: four years at the full limit, then $5,000 in the fifth. Keep in mind that the rollover doesn’t add to your child’s Roth IRA room. It uses that room. In a year when the full limit comes from the 529, your child can’t also make their own Roth contribution.

One rule works in your favor. The income limits that keep higher earners from contributing to a Roth IRA don’t apply to a 529 rollover, so a beneficiary who earns too much for a regular Roth contribution can still receive one, Vanguard says.

Timing works the way it does for a regular Roth contribution. A rollover made between January 1 and the April tax deadline can count toward the previous year if it’s designated that way, according to the IRS’s instructions for reporting the rollover and Saving for College. The earned income has to come from the year the rollover counts toward, Vanguard notes, and its form asks which year you intend, applying the current year if you leave it blank.

How to roll 529 money into a Roth IRA, step by step

The 529 account owner, usually a parent, starts the transfer, but the money ends up in an account your child owns. Most 529 plans are processing these rollovers, Saving for College reports. Here’s the process, drawn from the steps Saving for College, T. Rowe Price, and Vanguard describe.

Step 1: Confirm the account qualifies

Find the date the 529 was opened and make sure it was at least 15 years before the date you plan to move money. If the beneficiary was ever changed, or the account came from another plan, talk with the plan and a tax professional before you count on it qualifying, since the IRS hasn’t settled those questions.

Step 2: Work out this year’s amount

Find the smallest of four numbers: the year’s IRA limit minus any IRA contributions your child has already made for the year; your child’s earned income for the year, minus those same contributions; the 529 money old enough to move; and whatever is left of the $35,000. The worked example below shows the math.

Step 3: Check your state’s rules

A rollover that’s tax-free federally can still cost you at the state level, especially if you claimed a state tax deduction or credit for your contributions. The state section below lists where that can happen.

Step 4: Open a Roth IRA in your child’s name

The receiving account has to be a Roth IRA owned by the 529 beneficiary, not by you. If your child doesn’t have one, open it first; you’ll need the account number and details about the firm for the transfer paperwork, Saving for College notes. Many firms let you open an IRA that will be funded later, and for a beneficiary under 18, an adult can open a custodial Roth IRA on the child’s behalf, according to T. Rowe Price.

Step 5: Request a direct transfer from the 529 plan

Check your 529 plan’s website or call it for its Roth rollover instructions. Most plans use a form, which typically asks for the 529 account details, the Roth IRA details, the amount, and the account owner’s signature. If the form asks which tax year the rollover counts toward, fill that in.

The money has to go directly from the plan to the Roth IRA. Don’t withdraw it and deposit it yourself: that turns the rollover into a nonqualified withdrawal, with income tax and the 10% penalty on the earnings, Saving for College warns.

Step 6: Keep the paperwork, and repeat each year

After the transfer, the 529 account owner gets Form 1099-Q reporting the withdrawal, and the beneficiary gets Form 5498 from the Roth IRA firm, showing the rollover in box 10 alongside any other Roth contributions for the year, Vanguard explains. The IRS has the rollover reported as a Roth IRA contribution, not as a rollover. Behind the scenes, Section 529 also requires the plan to send the Roth IRA’s trustee a report on the account’s contributions and earnings.

Check that both forms are right, file them with your records of contribution dates, and keep a running total against the $35,000 cap. Then repeat each year until the leftover money or the cap runs out.

A worked example: how much can move in 2026

Here’s how the limits stack up for one hypothetical family. Maya’s parents opened a 529 for her in 2004, when she was a baby, so the account is more than 15 years old and she has always been its beneficiary. She’s 23 now, done with college, and has $28,400 left in the account. Of that, $3,400 comes from a $3,000 gift her grandparents made in 2023, which hasn’t been in the account five years yet. Maya earned $6,200 at a part-time job in 2026 and has already put $1,000 of it into her own Roth IRA.

This year, Maya’s paycheck is the limit that binds. If she earns more next year and skips her own contribution, more of the yearly limit can come from the 529. Her grandparents’ 2023 gift becomes eligible once it has been in the account five years, in 2028.

Will your state tax the rollover?

The federal tax break doesn’t guarantee a state one. Each state decides whether it treats a 529-to-Roth rollover as a qualified withdrawal, and the answer matters most if you claimed a state tax deduction or credit for your contributions. In states that don’t treat the rollover as qualified, you may have to pay those breaks back, which is called recapture.

As of July 22, 2026, 39 states, including the nine with no state income tax, treat the rollover as qualified, according to a state-by-state status board kept by Paul Curley of ISS Market Intelligence. Eleven states and Washington, D.C., don’t.

States can change their positions, so read your plan’s current disclosure documents or ask a tax professional before you start. If your state would recapture a deduction, the rollover can still be worth it for the decades of tax-free growth, but run the numbers first.

Planning ahead while your child is young

For parents of young children, the most useful thing to know about the rollover is the 15-year clock, because the only way to start it is to open the account. A 529 opened at birth clears 15 years when your child turns 15, long before a typical rollover would happen. One opened at 10 can’t roll anything over until 25. One opened at 15 has to wait until 30.

Those years matter, because money that reaches a Roth IRA earlier has longer to grow. At a steady 7% a year, the hypothetical return used across GoodNest’s guides, $35,000 moved into a Roth IRA over five years starting at age 22 could be worth about $568,600 by 65. The same rollovers starting at 30 would grow to about $330,900.

• Rolled over from the 529
• Growth by 65 at 7% a year

Show the numbers

Value at 65 of $35,000 in rollovers, by starting age

Rollovers start	Rolled over	Growth	Value at 65
Age 22	$35,000	$533,600	$568,600
Age 25	$35,000	$429,200	$464,200
Age 30	$35,000	$295,900	$330,900
Age 35	$35,000	$201,000	$236,000

Hypothetical illustration: $7,500 a year for four years and $5,000 in the fifth, starting at the age shown, each growing at 7% a year until age 65, with no withdrawals. It assumes the yearly limit stays at $7,500; because that limit rises with inflation, the full $35,000 may move a little faster. Not a forecast; actual returns will vary.

A rollover can even start in high school. A 529 opened at birth clears 15 years at 15, so a teenager with a summer job could receive a rollover, up to what they earned, in a custodial Roth IRA. Money that may still be needed for college usually belongs in the 529, though, where it can come out tax-free for education. High School (Ages 15-18) covers first paychecks and first Roth IRAs.

A few habits keep the rollover available without letting it drive your plan:

• Open the 529 early, even small. A first deposit from birthday or holiday gifts starts the clock. The Infant Years (Ages 0-2) covers the rest of the early checklist.
• Keep one child per account. Since a beneficiary change may restart the clock, name each child on their own 529.
• Don’t save extra just to roll it over. The rollover is a safety valve, not a strategy. It’s capped at $35,000, it uses your child’s own Roth room, it needs earned income, and some states tax it. Setting Realistic Goals: How to Balance College Savings and General Wealth can help you size the 529 and steer anything beyond college into flexible accounts.
• Know the other options for leftover money. A 529 can still pay for graduate school, registered apprenticeships, and certain credential programs, plus up to $20,000 a year of K-12 expenses starting in 2026 and up to $10,000 of student loan payments over a lifetime, according to the IRS. You can also switch the beneficiary to another member of your child’s family without owing income tax.

The Complete Guide to 529 College Savings Plans covers each of those options, and Liquidating Safely explains how to draw an account down in the right order. If you’re still deciding whether a 529 is the right account at all, Comparing Investment Accounts for Kids lays out the alternatives.

If you’d like birthdays and holidays to build your child’s 529 from the start, GoodNest can help collect those gifts. Family and friends give from your child’s GoodNest page, often alongside a small keepsake like a book, and send the money straight to you by Zelle, Venmo, or PayPal. GoodNest never holds or invests it, so you decide where it goes, including a 529 opened early enough to start the 15-year clock. If you choose a 529 plan as the destination on your child’s page, the page tells family that’s where their gifts go. The GoodNest Guide to Asking for Investments Instead of Toys has scripts for starting the conversation.

The bottom line

The 529-to-Roth IRA rollover eases one of the most common worries about 529 plans: money left over when school is done. It works best as a backstop, moving up to $35,000 over several years into a Roth IRA your child owns. To use it:

1. Make sure the 529 has been open at least 15 years, with the same beneficiary.
2. Work out this year’s amount: the smallest of the IRA room, your child’s earned income, the money that’s been in the account more than five years, and what’s left of the $35,000.
3. Check how your state treats the rollover.
4. Open a Roth IRA in your child’s name if they don’t already have one.
5. Ask your 529 plan for a direct transfer, and note the tax year it counts toward.
6. Keep the tax forms and your records, and repeat each year.

If your child is still young, the best move is also the easiest: open the 529 now, even with a small first deposit, so the clock is already running. Comparing Investment Accounts for Kids shows where a 529 fits among your other options.

Frequently asked questions

How much can you roll over from a 529 to a Roth IRA in 2026?

Up to $7,500, or $8,600 if the beneficiary is 50 or older, minus any other IRA contributions the beneficiary makes for 2026. The rollover also can’t be more than the beneficiary earned from work that year or more than the 529 money that has been in the account at least five years. Over a lifetime, rollovers for one beneficiary are capped at $35,000, so moving the full amount takes at least five years at the 2026 limit.

Does changing the 529 beneficiary restart the 15-year clock?

Possibly. The law requires the 529 account to have been maintained for 15 years, but the IRS hasn’t said whether a beneficiary change restarts that period. Saving for College says a change will likely restart it, and advisors have been telling families to leave the beneficiary unchanged on any account they might roll over until the IRS issues guidance.

Do Roth IRA income limits apply to a 529 rollover?

No. The income limits that phase out regular Roth IRA contributions for higher earners don’t apply to a 529-to-Roth rollover. The beneficiary still needs earned income at least equal to the amount rolled over, and the rollover still counts toward the yearly IRA contribution limit.

Is a 529-to-Roth IRA rollover taxable?

Not federally, if every rule is met: the account is at least 15 years old, the money has been in it at least five years, the transfer goes directly to the beneficiary’s Roth IRA, and it stays within the yearly and $35,000 limits. State taxes can differ. As of July 2026, 11 states and Washington, D.C., don’t treat the rollover as a qualified withdrawal, which can mean paying back state deductions or credits, and California taxes the earnings.

Can a teenager receive a 529-to-Roth IRA rollover?

Yes, if the rules are met. There’s no minimum age for a Roth IRA, but the beneficiary needs earned income at least equal to the rollover, such as wages from a summer job, and a minor’s Roth IRA is a custodial account opened by an adult. A 529 opened at birth reaches the 15-year mark around age 15, though money that may still be needed for college is usually better left in the 529, where education withdrawals are tax-free.

Sources

• Internal Revenue Service, “Topic no. 313, Qualified tuition programs (QTPs)” (page reviewed September 24, 2026).
• Legal Information Institute, Cornell Law School, 26 U.S. Code § 529, Qualified tuition programs (accessed October 1, 2026).
• Jeff White, Saving for College, “529 to Roth IRA: Rollover Rules, Conversion Guide, and FAQs” (updated August 6, 2026).
• Andy Ives, The Slott Report, Ed Slott and Company, “529-to-Roth: Still No News on 15-Year Clock” (2026; accessed October 1, 2026).
• Judith Ward, T. Rowe Price, “Five things to know about 529-to-Roth IRA rollovers” (April 2025).
• Vanguard, “How to take advantage of 529-to-Roth IRA rollovers” (accessed October 1, 2026).
• Internal Revenue Service, IR-2025-111, “401(k) limit increases to $24,500 for 2026, IRA limit increases to $7,500” (November 13, 2025).
• Internal Revenue Service, Instructions for Forms 1099-R and 5498 (2023), “Qualified tuition program (QTP) rollover to a Roth IRA” (December 18, 2023).
• Paul Curley, ISS Market Intelligence, “Status Board: State Income Tax Treatment on 529 Distributions to Roth IRAs” (last updated July 22, 2026).

This article is for general educational purposes only and is not tax, legal, or investment advice. It reflects federal rules as of the date above. The IRS has not issued detailed guidance on several parts of the 529-to-Roth IRA rollover, and state tax treatment varies and can change. The 7% figure is a hypothetical assumption, and actual returns will vary. GoodNest does not provide tax, legal, or investment advice and does not hold or invest funds. For your family’s situation, consider consulting a tax professional or financial advisor.