529-to-Roth rollover.

In plain English

A 529-to-Roth rollover is a move that lets you shift unused money from a 529 college savings plan into the beneficiary's Roth IRA, a retirement account that grows tax-free. It was created so families would not feel trapped if a child got a scholarship, finished cheaply, or skipped college. The rollover is tax-free and penalty-free, but it comes with rules: the 529 account generally must have been open for at least 15 years, the money rolls into the Roth IRA of the same person named on the 529, the beneficiary needs earned income at least equal to the amount moved that year, and there is a lifetime cap plus a yearly limit tied to normal Roth contribution rules. It does not let you empty a large 529 into a Roth all at once.

01Why it matters

It removes a big fear about over-saving in a 529: that leftover money would get taxed and penalized if not spent on school. Now extra college savings can quietly become retirement savings instead.

02The math, step by step

Say your child finishes college with money left in their 529. If the account meets the age requirement and your child has enough earned income that year, you can roll some of that leftover balance into your child's Roth IRA each year, up to that year's Roth IRA contribution limit, until you reach the $35,000 lifetime cap per beneficiary. Under the SECURE 2.0 Act section 126, these rules are fixed by statute (not inflation-adjusted): the 529 account must have been open at least 15 years, contributions made in the prior 5 years and their earnings are not eligible to roll, and the beneficiary must have earned income at least equal to the amount rolled that year.

03What this is NOT

04Receipts

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