One of the most praised provisions of SECURE 2.0 allows families with leftover 529 college savings accounts to roll those funds directly into a Roth IRA for the plan beneficiary without incurring income tax or early withdrawal penalties.
1. Key Qualification Criteria
To qualify for a tax-free 529-to-Roth IRA rollover, the 529 account must have been open for at least 15 years prior to the transfer. Additionally, contributions made to the 529 plan within the past 5 years (and earnings on those contributions) are ineligible for rollover.
2. Lifetime Cap and Annual Contribution Limits
The total lifetime amount that can be rolled over from a 529 plan to a beneficiary's Roth IRA is capped at $35,000. Furthermore, annual rollovers are subject to the standard annual Roth IRA contribution limit (e.g., $7,500 in 2026) and count toward the beneficiary's annual limit for that year.
3. Jumpstarting Young Adult Retirement Accounts
This provision eliminates the fear of overfunding 529 accounts. Parents and grandparents can save for higher education knowing that unused funds can give young adult beneficiaries a tremendous head start on retirement compound growth.
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