We had an NY saves 529 plan for our son who graduated in 2025 and is working. There is $34000 left in the plan after paying for all the way to Graduate school. The plan was started in 2006 so technically it is eligible for Roth rollover for my son. Should I keep it going as 529 under our control to transfer to any future grandkids or let him rollover into his Roth?
The pros of keeping in 529 for future say 20 years down the line is that it grows untouched invested in growth portfolios and would be passed to him as a trust for his kids in future. If he never has kids it can roll over to his Roth in future any way.
What to do with left over money in 529?
byu/AcademicHedgehog7239 inpersonalfinance
Posted by AcademicHedgehog7239
7 Comments
Man 34k leftover is a good problem to have lol. I’d probably lean toward keeping it as a 529 for potential grandkids since you can always do the Roth rollover later if no kids happen, but once you roll it you can’t go back. Plus 20 years of tax-free growth for education beats the annual Roth contribution limits
I would do a Roth IRA transfer. This is amazing way to fund his Roth with so many years of tax free growth.
Don’t rightly know. Our son completed his undergrad in 2006 and his grad school was on scholarships. Our final contribution in 2006 was never used, just a couple $K and we were exhausted. Son has the account but we still own it. We don’t need it, Son doesn’t need it. Don’t know if they will have children. Currently thinking making it as a scholarship donation?
Take the Roth option. It means much greater flexibility, and no downside. Here is why…
The Roth rollovers must happen in steps anyway, subject to the annual Roth IRA contribution limits, currently $7500 each year,
So you could begin doing that annually, as you know. At any point, if you changed your mind you could stop doing it.
But suppose you rolled over 5 times virtual draining the 529… As a rollover (from the 529) each $7500 might be subject to a separate 5-year rule.
If it’s now 2032 and there’s still some dollars in the 529, up to $10,000 may be taken for student loans.
Finally, after all that, and the 5-year rules are all satisfied, now it’s 2037.
Do recall Roth contributions and rollovers aren’t “growth.” So they may be taken out, without tax or penalty.
From 2037, those old 529 funds may be taken from the Roth without tax or penalty, and used for any purpose whatsoever, including a grandchild’s education, but not exclusively.
So you’re cut ties with the 529 restrictions without sacrificing any tax-exempt advantage or growth.
Any grandchild wouldn’t be attending college before 2043, anyway. (Feel old, yet?)
You need to discuss it with your son.
I knew after school I would want kids eventually. So I haven’t touched what’s leftover in mine and will pass it on to my future kids while putting more in monthly.
Your kid would benefit from either scenario. Keeping it in for his kids, or rolling it into a Roth. EIther way you will be helping him out in the future. Depending on where the grandkids go to school, and how you have it invested, that 34K could be a decent amount in 18 plus years (or whenever he starts having kids).
I would go Roth account. For the first few working years the 7.5k Ira contribution is a lot but the math on time makes it worth it. Having up to 5 years of contributions is nice way to set up a Roth for retirement.