February 12, 2026
529-to-Roth Rollovers
By Elliot Palabe, CFP®
Introduction
Recent legislation has introduced a new planning opportunity for families with unused 529 education savings funds. Under the SECURE 2.0 Act, certain 529 plan assets may now be rolled into a Roth IRA for the beneficiary, subject to specific rules and limitations¹.
This change offers flexibility for families concerned about overfunding education accounts. However, eligibility requirements, contribution limits, and income rules must be carefully followed to avoid unintended tax consequences.
1. What Is a 529-to-Roth Rollover?
Beginning in 2024, eligible 529 plan assets may be transferred directly into a Roth IRA in the name of the 529 beneficiary¹.
The rollover must be executed as a direct trustee-to-trustee transfer and is not treated as a taxable distribution if all requirements are satisfied.
2. Eligibility Requirements
Several important rules apply:
- The 529 account must have been open for at least 15 years¹.
- Contributions (and earnings on those contributions) made within the last five years are not eligible for rollover¹.
- The rollover must be made to a Roth IRA in the name of the same beneficiary.
- The beneficiary must have earned income equal to or greater than the amount rolled over in that year².
Planning note:
Earned income is required. A beneficiary without wages or self-employment income cannot complete a rollover for that year.
3. Contribution Limits
529-to-Roth rollovers are subject to annual Roth IRA contribution limits².
- For 2026, the Roth IRA annual contribution limit is $7,500 (or $1,100 if age 50 or older)².
- The rollover amount counts toward the beneficiary’s annual Roth IRA contribution limit.
- There is a lifetime rollover cap of $35,000 per beneficiary¹.
Importantly, Roth IRA income phase-out limits do not apply to these rollovers¹.
Planning note:
Because annual contribution limits apply, maximizing the full $35,000 lifetime cap may take several years.
4. Tax Treatment
When properly executed, the rollover is not taxable and not subject to penalty¹.
Once in the Roth IRA, the funds grow tax-free, and qualified Roth distributions in retirement may also be tax-free, provided Roth rules are met².
Planning note:
Unlike Roth conversions (which have their own five-year penalty clocks), 529-to-Roth rollovers are treated as regular Roth contributions, not conversions.
That means:
- No separate five-year clock for each rollover
- No conversion-style penalty clock
- The standard Roth ordering rules apply
5. Strategic Planning Considerations
For families who have excess 529 funds after education expenses are covered, this provision may:
- Provide a head start on retirement savings for the beneficiary
- Reduce concerns about overfunding a 529
- Offer tax diversification early in life
However, 529 funds used for qualified education expenses remain highly tax-efficient, and in many cases education funding should remain the primary objective.
Additionally, changing beneficiaries, using funds for graduate school, or reserving assets for future educational needs may still be appropriate alternatives.
Key Takeaways
529-to-Roth rollovers offer meaningful flexibility but require strict adherence to eligibility and contribution rules. Coordination between education planning and long-term retirement strategy is essential to maximize benefits while avoiding unintended tax consequences.
At Palabe Wealth, we help families evaluate whether this new provision fits within a broader financial strategy, balancing education funding, tax efficiency, and long-term wealth planning.
As always, Palabe Wealth is here to help. If you have any questions regarding your retirement plan, schedule a 15-minute introductory phone call by contacting us at (847) 249-6600.
References
- SECURE 2.0 Act of 2022, Section 126, 529-to-Roth IRA Rollovers.
- Internal Revenue Service, Roth IRA Contribution Limits, 2025.
Disclosures
This material is for general informational purposes only and is not intended to provide specific tax, legal, or investment advice. Individuals should consult with their tax advisor, financial professional, or attorney regarding their unique circumstances. Past performance is no guarantee of future results. Investing involves risk, including possible loss of principal. Securities and advisory services offered through LPL Financial, a registered investment advisor and member FINRA/SIPC. Palabe Wealth and LPL Financial are separate entities.
Elliot Palabe, CFP®
Elliot Palabe is a Wealth Advisor at Palabe Wealth, where he plays a pivotal role in designing comprehensive retirement plans and working directly with clients to address their financial needs. Elliot's expertise lies in his ability to combine personalized Financial Planning with strategic Tax Planning, helping to ensure that each client's financial strategy is both optimized and aligned with their individual goals and circumstances.
Elliot has a solid educational foundation that underpins his professional acumen, as he holds a Bachelor’s degree in Finance from the Foster College of Business at Bradley University. His academic background has provided him with a deep understanding of financial markets, investment strategies, and economic principles.
Elliot is a CERTIFIED FINANCIAL PLANNER™ professional. He holds several critical financial industry licenses, including the Series 65, 63, 6, and SIE, held through LPL Financial. These qualifications enable him to offer comprehensive investment guidance and demonstrate his thorough knowledge of the financial services industry.
A specialist in the use of sophisticated financial planning and tax planning software, Elliot brings a technological edge to his approach. This expertise allows him to create detailed and highly personalized financial plans that can adapt to changing market conditions and tax environments. By leveraging cutting-edge technology, Elliot ensures that Palabe Wealth's clients receive the most accurate, up-to-date, and effective financial advice possible.
His work is instrumental in helping clients navigate the complexities of financial planning and retirement preparation, helping to ensure they are well-positioned to pursue their long-term financial objectives.
Outside of work, Elliot competes in pickleball. The game’s blend of strategy and precision reflects the same qualities he brings to financial advising - thoughtful planning, attention to detail, and focus.
