Section 126 of SECURE 2.0 allows a beneficiary to roll unused 529 funds into their own Roth IRA — but only $35,000 lifetime, only after the account has been open 15 years, only what was contributed (not earnings) in the last five, and only up to annual Roth limits. See what your plan really supports.
| Scenario | Eligible Rollover | Tax Years Needed |
|---|---|---|
| $8,000 balance, $1,200/yr, 6 yrs, 6% growth | $7,000 | 1 |
| $18,000 balance, $2,000/yr, 5 yrs, 5% growth | $7,000 | 1 |
| $25,000 balance, $0/yr, 4 yrs, 7% growth | $7,000 | 1 |
Each row applies the same rule as the calculator: grow the balance at the stated rate while adding contributions, then cap at the $35,000 lifetime limit. A beneficiary who is 22 today can move at most $7,000 per year, so even a fully eligible $35,000 takes five tax years.
SECURE 2.0 §126 is narrower than most headlines suggest. Before any dollar moves, all four of these must hold:
The rollover counts against the beneficiary's annual Roth IRA contribution limit ($7,000 for 2025–2026 under age 50). A $35,000 lifetime allowance therefore needs at least five separate tax years to drain. The beneficiary also needs earned income at least equal to the rollover amount — a full-time student with a summer job usually cannot roll the full $7,000.
The five-year lookback cannot be derived from a single balance figure. Subtract recent contributions yourself before treating the number above as final, and confirm with the plan administrator, who must report the rollover on Form 1099-Q.
The families who gain are the ones who over-funded a 529 for a child who chose a cheaper path — a state school instead of private, a two-year program, or a trades apprenticeship. Traditionally that surplus had two bad exits: pay income tax plus a 10% penalty on earnings, or change the beneficiary to a sibling. The Roth rollover adds a third exit that preserves tax-free growth, but at a pace so slow that it only matters for a beneficiary in their early-to-mid twenties with decades of compounding ahead.
For a leftover balance above roughly $35,000 (or above five years × $7,000), the rollover route still leaves money in the 529. Compare that remainder against a 529-to-529 beneficiary change, or qualified expenses like a future grandchild's tuition only if the plan permits a generation-skipping transfer election.
Three exits, ranked by tax cost. The rollover is tax-free but capped and slow. Leaving the money in the 529 is tax-free but only usable on qualified education expenses. Cashing out is immediate but taxed: earnings are ordinary income plus a 10% penalty. For a $20,000 balance with $6,000 of earnings, a cash-out at a 22% bracket costs roughly $1,900 in penalty and tax — a real number to weigh against five years of paperwork.
⚠️ Important: This tool estimates eligibility under SECURE 2.0 §126 using the inputs you provide. It cannot verify the 15-year account age or the five-year contribution lookback, and it does not model the beneficiary's earned income test. Confirm amounts with your 529 plan administrator and a tax adviser before filing.