New 529 Plan Rules: What Families Need to Know

Recent updates to 529 college savings plans could significantly affect how families plan for education expenses. Most notably, unused 529 funds may now be transferred to a Roth IRA, offering added flexibility if college costs are lower than expected. However, this option comes with several important rules and limitations.

Key Requirements to Transfer 529 Funds to a Roth IRA

• The 529 plan must be open for at least 15 years.

• Changing the beneficiary to a different student may restart the 15-year clock.

• The Roth IRA must be owned by the 529 beneficiary (typically the student).

• Transfers are subject to annual Roth IRA contribution limits.

• There is a lifetime transfer limit of $35,000.

• Contributions made to the 529 plan within the past five years are not eligible for transfer.¹

These updates help address concerns about overfunding 529 plans while still emphasizing the importance of careful planning and compliance with IRS rules.

We’re sharing this information to ensure you have the most up-to-date guidance when planning for college expenses. If you have questions about how these new rules may affect your current strategy—or if you’d like help evaluating specific state plans—our team is here to help.

^{1. Investopedia.com, June 17, 2025}