A New Option for Leftover 529 Plan Money

Many families worry about what happens if money is left over in a 529 college savings plan. In the past, unused funds often left families choosing between changing beneficiaries or paying taxes and penalties. Recent rule changes have created a new planning opportunity: under certain conditions, you can now contribute unused 529 plan funds to a Roth IRA for the beneficiary. This change gives families more flexibility when planning for both education and long-term financial goals.

The ability to contribute unused 529 funds to a Roth IRA is subject to several eligibility requirements and restrictions, including the following:

• The 529 plan must have been open for a minimum of 15 years. Changing beneficiaries to another student may restart the 15-year clock.

• The owner of the Roth IRA must be the beneficiary of the 529 plan (i.e., the student).

• Any money contributed from a 529 plan to a Roth IRA account will be subject to Roth IRA annual contribution limits.

• The lifetime limit is $35,000 per beneficiary.

• Contributions (and related earnings) made to the 529 plan within the last five years are not eligible.

• The beneficiary must have earned income at least equal to the contribution amount for that year.

If you have any questions about these changes or wish to discuss the potential impact on your existing college strategy, please don't hesitate to reach out. Our professionals can provide more detailed information about 529 plans and offer guidance and insight into the state plan you are considering. We look forward to hearing from you.

The information contained on this site may not reflect current developments; does not constitute investment, tax, or legal advice; and should not be relied upon for such purposes. There is no guarantee that any forecasts made will come to pass. We make no representation about the accuracy of the information or its appropriateness for any given situation. This information is not an offering. Past performance does not guarantee future results.