TL;DR
Get smart everyday buys delivered free with Prime
- Fast, free delivery on millions of items
- Prime Video, Amazon Music and more included
- Member-only deals all year
Sens. Ted Cruz and Lisa Blunt Rochester have proposed legislation to remove the $35,000 lifetime cap on rolling unused 529 plan funds into a Roth IRA. The bill would retain existing limits and eligibility rules, including annual Roth contribution limits, a 15-year account requirement and the beneficiary’s earned-income requirement. It has been proposed, not enacted.
Sens. Ted Cruz and Lisa Blunt Rochester have proposed a bipartisan bill to remove the $35,000 lifetime cap on transferring unused 529 plan savings to a Roth IRA, potentially allowing families to move more education funds into retirement accounts. The proposal, called the 529 Retirement Enhancement Act of 2026, has not become law; it would keep other restrictions on these rollovers in place.
The measure would change one part of the rollover rules established by the SECURE Act 2.0, enacted in 2022. Current law permits up to $35,000 over a beneficiary’s lifetime to be moved from a 529 plan to that beneficiary’s Roth IRA, subject to conditions. The proposed bill would remove that lifetime ceiling, while retaining the other requirements, according to the source report.
Those rules include a limit tied to the annual Roth IRA contribution maximum: a transfer in a given tax year cannot exceed the amount the beneficiary could contribute that year. For 2026, the report gives that limit as $7,500 for people under 50. The 529 account must have been open at least 15 years, the Roth IRA must belong to the 529 beneficiary, and the beneficiary must have earned income at least equal to the rollover. Amounts transferred must also come from contributions and earnings in the 529 account that have been there for at least five years.
The bill would not, by itself, make every unused 529 balance immediately available for retirement. Because transfers remain limited by annual contribution rules and the beneficiary’s income, moving a large balance could take years. Families would still need to meet the account-age and five-year rules, and the source material does not establish how the proposal would apply to every possible account circumstance.
More Options for Unused College Savings
The proposal could give families another way to use education savings when a child attends a less expensive school, receives a scholarship or does not pursue college. Under current rules, withdrawing 529 funds for a nonqualified expense generally means the earnings portion is subject to ordinary income tax and a 10% federal penalty. Account holders can also leave the money invested for future qualified education expenses or change the beneficiary to an eligible family member.
Removing the lifetime cap could make the Roth route more useful for some families, while leaving the annual restrictions in force. Transfers that meet the rules would place funds in the beneficiary’s retirement account, where Roth investment growth and qualified withdrawals receive tax advantages under applicable rules. That option may reduce the risk that families see unused savings as stranded, but the outcome depends on the bill becoming law and each transfer meeting the requirements.
The change could also affect how families think about saving in a 529 plan. The source report says there is no annual federal contribution limit for 529s, though state plans set maximum account balances per beneficiary. Larger balances are possible, so the lifetime rollover ceiling can matter to households with substantial leftover funds. The proposal does not remove state plan limits or change the separate rules governing contributions and gifts.
As an affiliate, we earn on qualifying purchases.
How Current 529 Rollovers Work
529 plans are education savings accounts funded with after-tax dollars. Investment growth is tax-deferred, and withdrawals for qualified education expenses receive favorable federal tax treatment. Some states offer deductions for contributions to in-state plans, according to Fidelity Investments, cited in the source report.
Congress created the 529-to-Roth rollover option through the SECURE Act 2.0, passed at the end of 2022. It offered a way to move some unused education savings into a Roth IRA, but capped eligible rollovers at $35,000 over a beneficiary’s lifetime. The new bill would keep the framework and its conditions while seeking to remove that cap.
The source report also describes 2026 gift-tax thresholds: contributions of up to $19,000 per person, or $38,000 for a married couple, qualify for the annual gift-tax exclusion per beneficiary. It says contributors may use the five-year election to front-load up to $95,000 per person or $190,000 per married couple. These figures concern 529 contributions, not the amount that can be rolled into a Roth IRA each year.
As an affiliate, we earn on qualifying purchases.
Bill’s Path and Final Rules
The source material does not state whether the bill has advanced beyond its proposal, when Congress might consider it, or whether lawmakers have proposed amendments. It is therefore not yet clear if or when the lifetime cap could change. Until legislation is enacted and applicable guidance is issued, the existing $35,000 limit remains the rule described in the report.
The proposal is described as retaining current requirements, but the source does not provide legislative text or explain how implementation would handle particular cases, such as changes to a 529 beneficiary or account history. Families should not treat the proposal as permission to make a larger rollover under current law.
As an affiliate, we earn on qualifying purchases.
Congressional Consideration Ahead
The next step is for Congress to consider the bill. The source material does not identify a committee hearing, vote or legislative timetable, so no enactment date can be confirmed. Until a change is passed, signed into law and made effective, families should rely on current 529-to-Roth rollover rules, including the lifetime cap and annual eligibility restrictions.
If the proposal advances, details to watch include whether lawmakers keep all existing conditions, how any effective date would work and whether agencies issue guidance on transfers. For now, the bill signals a proposed change—not an immediate expansion of rollover eligibility.
tax-advantaged retirement accounts
As an affiliate, we earn on qualifying purchases.
As an affiliate, we earn on qualifying purchases.
Key Questions
What would the 529 Retirement Enhancement Act change?
It would remove the $35,000 lifetime cap on rollovers from a 529 plan to a Roth IRA. The proposal would retain other requirements, including annual contribution limits and eligibility rules.
Can families roll over more than $35,000 under current law?
No. The source report describes current law as allowing a total of up to $35,000 over a beneficiary’s lifetime, subject to the other rollover requirements. The proposed bill has not been enacted.
What requirements would remain under the proposal?
The 529 account must have been open at least 15 years; the Roth IRA must be in the beneficiary’s name; transferred funds must have been in the account for at least five years; and the beneficiary must have enough earned income. The annual transfer also cannot exceed the applicable Roth contribution limit.
What happens if unused 529 money is withdrawn for a nonqualified expense?
According to the source report, the earnings portion is generally subject to ordinary income tax and a 10% federal penalty. Other options include keeping funds for future qualified education expenses or changing the beneficiary to an eligible family member.
Has the rollover limit changed yet?
No change is confirmed in the source material. The bill is a proposal, and the existing $35,000 lifetime cap remains in effect unless Congress changes the law.
Source: rss
Halloween Picks
halloween
As an affiliate, we earn on qualifying purchases.
