You may roll over any extra funds to a Roth for the beneficiary up to $35,000.
A longstanding concern for more wealthy families was overfunding a 529. The SECURE 2.0 law addressed this directly in December of 2022. Owners of a 529 plan are now able to roll over assets to a beneficiary’s Roth IRA, subject to conditions:
The 529 plan must have been in existence for at least 15 years, Note that an open account with zero dollars counts in this timing.
contributions from the previous five years are ineligible,
There is a $35,000 rollover maximum over the beneficiary's lifetime,
The beneficiary must have compensation equal to or greater than the rollover amount, and
Standard annual Roth IRA contribution limits apply, in 2026 $7,500/year.
Crucially, the Roth IRA owner's income does not affect eligibility for the rollover — meaning high-earning beneficiaries who cannot otherwise contribute to a Roth IRA can still receive this benefit.
Zane would like to create a Roth account, but he has a traditional IRA. Zane’s higher income does not allow him to create a Roth account without a two-step or back door approach. Answer: Use the money in Zane’s personal 529 plan. The 529 account must be open 15 years and money must be there five years, but it then rolls to a Roth account up to $35,000 with no MAGI limit.
No statement or example on this site should be considered a specific recommendation for your personal situation. Investing and tax strategies each carry significant risks. Examples herein may not apply to your situation. Please consult your estate attorney, tax advisor, or financial advisor for personal advice.