529 to Roth IRA Rollover Navigator
Understand the new Secure Act 2.0 rule and plan your strategy.
Step 1: Are You Eligible?
Before you plan, you must qualify. This new rule has strict requirements. Answer the questions below to see if this strategy could work for you.
Has the 529 account been open for at least 15 years?
Are you the same beneficiary named on the 15-year-old account?
Do you (the beneficiary) have earned income this year?
Your results will appear here.
Step 2: Plan Your Rollover Strategy
The rollover is limited by the beneficiary's annual Roth IRA contribution limit and a lifetime cap. Use this simulator to see how long it might take to move the maximum amount.
This determines the annual Roth IRA contribution limit (max $7,000 in 2024 for under 50).
Step 3: Understand the Rules
This strategy has important nuances. Expand the sections below to learn more.
The Lifetime and Annual Limits +
There are two hard caps:
- $35,000 Lifetime Limit: A beneficiary can only roll over a total of $35,000 from all 529 plans into their Roth IRA over their entire lifetime.
- Annual Limit: In any given year, the amount you roll over is limited to the beneficiary's annual Roth IRA contribution limit (e.g., $7,000 in 2024). This rollover counts as their annual contribution; they cannot do both a rollover and a separate contribution in the same year.
The "Last 5 Years" Contribution Rule +
To prevent abuse of the system, any contributions (and their earnings) made to the 529 plan within the five-year period leading up to the rollover are not eligible to be rolled over. This ensures the funds were genuinely intended for education.
No Income Limit on Rollovers +
Normally, high-income individuals are prohibited from contributing directly to a Roth IRA. However, the 529-to-Roth rollover is not subject to this income limitation. A high-income beneficiary can still perform the rollover, as long as all other conditions (like the 15-year rule) are met.
Case Study: The Clark Family
Let's see how this works in practice.
Susan Clark's grandparents opened a 529 plan for her in 2008. Susan is now 24 and recently graduated college with the help of a scholarship, leaving $40,000 in her 529 plan.
- The Goal: Susan wants to move the leftover funds into her Roth IRA to get a head start on retirement savings.
- Qualification: The account is 17 years old (>15), she is the beneficiary, and she has a job earning $60,000/year. She qualifies.
- The Strategy:
- Year 1: Susan rolls over $7,000 (the 2024 annual limit). Her remaining 529 balance is $33,000.
- Year 2: She rolls over another $7,000. Remaining balance: $26,000.
- Years 3-5: She continues this process, rolling over the maximum allowed each year.
- Year 5: She rolls over the final $7,000, reaching the $35,000 lifetime limit.
- The Result: Over five years, Susan successfully moved $35,000 of tax-free 529 funds into her Roth IRA, where it can continue to grow tax-free for her retirement. The remaining $5,000 stays in the 529 for other qualified expenses or could be withdrawn (subject to tax/penalty on earnings).
