A 529 plan is an investment account for education costs, and the growth comes out tax-free when you spend it on qualifying expenses. The old worry was what happens if your child gets a scholarship or skips college. Money withdrawn for anything else gets taxed on the earnings and charged a 10% penalty on them. Now there's a third option. Leftover 529 money can be rolled into a Roth IRA, with limits that matter.
A viewer's comment pushed me to read the rollover rules line by line in a deeper dive on 529 college savings plans. Here's what I found.
The 529 account has to have been open for at least 15 years. The Roth IRA has to belong to the same person the 529 names as beneficiary, so a parent can't roll a child's account into the parent's Roth. The lifetime cap is $35,000. Each year's rollover also counts against the regular Roth IRA contribution limit, which was $7,000 in 2025 for people under 50, and it can't be more than the person earned that year. At $7,000 a year, rolling the full $35,000 takes five years.
Rolling over isn't the only choice. You can change the beneficiary to another family member, including a sibling or yourself, and 529 money can also pay up to $10,000 of student loans for the beneficiary or a sibling, or cover registered apprenticeship costs. A rollover makes the most sense when nobody else in the family can use the money.
There's a lookback too. Money contributed in the last five years, and the earnings on it, isn't eligible. So an account that got a big deposit three years ago can't send that deposit over yet.
Some questions were still unsettled when I covered it. If you open the 529 in your own name and later change the beneficiary to your child, does the 15-year clock restart? The IRS hadn't clearly said, so ask a tax professional before building a plan around it. Also, a few states make you pay back a 529 tax deduction or credit if you roll the money into a Roth. Oregon's credit is covered in how the Oregon 529 credit works, and it pays to confirm your state's rollover rules before you move anything.
Keep in mind that none of this changes the biggest risk with a 529, which is timing. If college is five years away or less, a portfolio full of stocks can drop right when the bills arrive. In that window, protecting what you've put in matters more than chasing gains. I'd also call a 529 and a cash value policy different tools that can sit side by side. The policy fits when the funding window is short and you want the money to stay flexible, because it isn't locked to education.
I'm a licensed insurance broker, not a tax advisor, so treat the limits above as the rules when I looked at them, since Congress has changed them before. The first step is to log in to your 529 and write down the date the account was opened, because that date starts the 15-year clock.