Excess 529 funds post graduation
Hi Terry!
My son just graduated from Iowa State University with a Civil Engineering Degree. It is unlikely that he will seek secondary education in that field, at least for some time. What is the smartest way to utilize the $30K in excess 529 funds he has left in the tank? Cash distribution with a tax hit, 401K, or Roth IRA?, etc.
Thanks!
Terry Says
You seem unaware of a relatively new provision that allows your son to roll a maximum of $35,000 of that money into a Roth IRA, when he has earned income. The annual rollover is subject to the IRA contribution limits for that year. In 2026 that limit is $7500. So over a few years, he could continue at least $35,000 of tax free growth on the money. And maybe save the rest, continuing to grow tax free for his eventual children??
