529 plans have long been a tax-advantaged way to save for education, but a recent change makes them even more appealing. Starting in 2024, you can transfer up to $35,000 from an overfunded 529 account to a Roth IRA for the same beneficiary. The account must be open for at least 15 years, and contribution limits still apply, but this provides a great option if a child doesn’t use all the funds for their education.

Previously, parents were limited in their choices for leftover funds, facing taxes or penalties. With this new flexibility, families can ensure that no contributions go to waste. However, overfunding still requires careful planning to avoid potential tax consequences, particularly when dealing with large balances across generations.

If your 529 savings exceed what’s needed for tuition, consult a tax advisor to explore the most tax-efficient strategies. You can change beneficiaries, pass the funds on to future generations, or now, transfer them into retirement savings through this new law.

By taking advantage of this update, you’ll have more options for unused education savings, making 529 plans a versatile tool in both education and retirement planning.