529 to Roth IRA Rollover Provision

Moving funds from a 529 plan to a Roth IRA for the beneficiary is now possible thanks to a provision in the SECURE Act 2.0, which took effect in 2024. This option allows for tax-free and penalty-free rollovers under specific conditions.  

Here’s how it works: 

First, the 529 account must have been open for at least 15 years. This is a key requirement, so you’d need to check the account’s start date to confirm eligibility. Next, the funds being rolled over—both contributions and earnings—must have been in the 529 plan for at least five years. This prevents using recently contributed money for an immediate rollover. 

The rollover is treated as a contribution to the Roth IRA, so it’s subject to the annual IRA contribution limits. For 2025, that’s $7,000 for individuals under 50. Importantly, the 529 beneficiary—not the account owner—must have earned income at least equal to the amount rolled over in that tax year. For example, if you roll over $5,000, the beneficiary needs at least $5,000 in earned income, like wages or self-employment income (not investment income). There’s also a lifetime limit of $35,000 per beneficiary for these rollovers. 

To execute this, you’d typically contact the 529 plan provider and the Roth IRA custodian (like a brokerage or bank). The process involves a direct trustee-to-trustee transfer to avoid taxes or penalties—meaning the funds go straight from the 529 to the Roth IRA, not through your hands. You’ll need to provide documentation, such as the 529 account details and proof of the beneficiary’s earned income and ensure the Roth IRA is set up in the beneficiary’s name. 

One major advantage is that these rollovers aren’t subject to the usual Roth IRA income eligibility rules since they’re classified as rollovers, not new contributions. However, the 529 account owner (often a parent) can’t redirect leftover funds to their own Roth IRA—it’s strictly for the designated beneficiary. 

Double-check with your 529 plan provider for any specific forms or steps they require and consider consulting a tax professional to ensure compliance with IRS rules, especially since this is a relatively new option and guidance is still evolving.  

Ticket #T008692 

Investment advice offered through Great Valley Advisor Group, a Registered Investment Advisor. Great Valley Advisor Group and Haas Financial Group are separate entities. This is not intended to be used as tax or legal advice. Please consult a tax or legal professional for specific information and advice.