The good news: You have options. One of those options is rolling eligible unused 529 plan funds into a Roth IRA for the beneficiary. This provides a way to turn unused higher education savings into a long-term investment for the beneficiary.
What Is a 529 Roth IRA Rollover?
Under federal law, a 529 Roth IRA rollover allows eligible education savings to be transferred into a Roth IRA for the beneficiary without federal taxes or penalties.1
What Changed?
In 2024, a new provision went into effect under the SECURE 2.0 Act that allows funds from a 529 plan to be transferred to a Roth IRA for the beneficiary.
- Lifetime rollover limit is $35,000 per beneficiary.
- Annual IRA limits apply.
- 529 account must be open for at least 15 years.
- Beneficiary must qualify to contribute to an IRA.
- Rollover funds must be in the account (including earnings) for at least five years.
Why This Matters for Families
This change reduces the risk of overfunding, adds flexibility, and allows unused savings to support the beneficiary beyond higher education needs. Having this option can help families to save with confidence, knowing that unused funds can be utilized even if they are not needed for higher education.
When a Rollover Might Make Sense
- Beneficiary receives a scholarship.
- Cost of higher ducation is lower than expected.
- Beneficiary decides to pursue a career where eligible funds are not needed.
- Excess savings remain in the account after higher education expenses are met.
Frequently Asked Questions
Can you roll 529 funds into a Roth IRA?
Yes, if eligibility requirements are met.1
What happens to my unused NY 529 funds if I don’t roll them over?
You can change your beneficiary, at any time, to another eligible family member for their qualified expenses (including tuition, certain room-and-board costs, books, supplies, and registered apprenticeship program expenses). You can also maintain the account for your beneficiary in case they want to pursue higher education at a later date. Find additional details in the Disclosure Booklet and Tuition Savings Agreement. Finally, you can take a nonqualified withdrawal, subject to certain taxes and penalties.2
Is the rollover tax-free?
Yes, the rollover is free of New York state and federal taxes if requirements are met.
Take the Next Step
If you are already saving, great! Keep savings in your NY 529 account, knowing you have the option to roll over unused funds for the beneficiary.
If you haven’t started saving yet, we hope this option provides peace of mind that an NY 529 account offers the flexibility that you and your family need in the future. To learn more about NY 529, visit our overview page. To get started with opening an account now, click here.
1 Certain restrictions, terms, and annual limits apply to Roth IRA rollovers. Rollover must be to a Roth IRA maintained for the benefit of the current NY 529 beneficiary. Rollovers can only be made from accounts open for at least 15 years and cannot include contributions or earnings on those contributions made within the last 5 years. The annual rollover limit is subject to IRA annual contribution limits, with a lifetime rollover limit of $35,000. Additional restrictions may apply under federal Roth IRA rules and guidance. Consult your tax advisor prior to initiating a rollover.
2 Earnings on federal nonqualified withdrawals may be subject to federal income tax and a 10% federal penalty tax, as well as state and local income taxes. Tax and other benefits are contingent on meeting other requirements. Please consult your tax advisor about your particular situation.
Contributions of up to $10,000 are deductible annually from New York State taxable income for married couples filing jointly; single taxpayers can deduct up to $5,000 annually. New York State tax deductions may be subject to recapture in certain circumstances such as rollovers to another state’s 529 plan, nonqualified withdrawals, withdrawals used to pay elementary or secondary school tuition as described in the Disclosure Booklet and Tuition Savings Agreement. State tax benefits for non-resident New York taxpayers may vary. Please consult your tax advisor about your particular situation. The New York State Department of Taxation and Finance has not yet determined whether withdrawals to pay expanded K-12 expenses and Credentialing Expenses would be New York Qualified Withdrawals or New York Nonqualified Withdrawals.
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