529-to-Roth Rule Clouds $35,000 Rollovers as 15-Year Beneficiary Test Remains Unclear
Updated
Updated · The New York Times · May 22
529-to-Roth Rule Clouds $35,000 Rollovers as 15-Year Beneficiary Test Remains Unclear
1 articles · Updated · The New York Times · May 22
$35,000 in 529 funds can be rolled into a Roth IRA under a 2024 law, but families still lack clear guidance on whether changing a beneficiary resets the required 15-year clock.
The ambiguity turns on statutory language requiring a 529 for a designated beneficiary to have been maintained for 15 years, without saying whether the account or the beneficiary relationship must last that long.
That uncertainty matters because many parents and grandparents routinely switch beneficiaries; a child added at 17 could be blocked from a rollover until 32 if the clock restarts.
The timing can have major retirement consequences: $35,000 invested at 7% for 40 years grows to more than $524,000, versus about $266,000 over 30 years.
The rollover option was created to make college saving more attractive by reducing fears of stranded 529 money, but the unresolved rule is limiting that promise.
How much retirement growth is lost while families wait for clarity on the ambiguous 529 rollover rule?
Did changing your 529 beneficiary just reset the 15-year clock for your Roth IRA rollover?