529 Plan Leftovers - What To Do With Them?

Contributed by: Cindy Wysong, CFP®

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Congratulations!  If you’re reading this, chances are you’ve met a major milestone – funding your child’s education.  If you have a little money left in the account, you are probably wondering what you can do with the balance.  Here are four options to consider!     

#1 - Change the Beneficiary

A 529 Plan can only have one beneficiary at a time, but that doesn’t mean you are locked in.  You can switch the beneficiary to another family member without penalty.  For instance, some parents choose to use a single 529 Plan for multiple children, simply updating the beneficiary as each one heads off to school.  Other 529 Plan owners keep the plan intact for their own use (back to school we go!) or even set it aside for their future grandchildren.  (If you are saving for a future student who is years away from school, make sure your investments are aligned with that longer time horizon.)  

#2 - Fund a Roth IRA

Thanks to the SECURE Act 2.0 of 2024, if the 529 Plan has been open for at least 15 years, you can now roll 529 funds into a Roth IRA owned by the beneficiary of the 529 Plan.  Annual contribution limits still apply ($7,000 in 2025).  There is a lifetime cap of $35,000 for this strategy.

#3 - Cash it Out

If none of the above options appeal to you, you can always cash out the account!  Want to put that money toward a dream vacation or a new kitchen remodel?  Go for it! 

But bear in mind, if the withdrawal is for a non-qualified expense, the earnings portion of the withdrawal will be subject to taxation plus a 10% penalty. 

#4 - Do Nothing

Not sure what to do yet?  No problem.  There’s no rule saying you have to make a decision right away.  You can leave the funds where they are and the account will keep chugging along.  If you’ve named a successor owner, they’ll take control of the account should something happen to you.

Leftover 529 funds are a great “problem” to have.  Whether you’re planning for your next student, building wealth for retirement, or just daydreaming about white sandy beaches, there’s flexibility in what you can do.  Take your time, explore your options, and enjoy this exciting next chapter of life!   

Cindy Wysong is a Partner and Wealth Advisor at BCWM, LLC.

To contact Cindy:

Email:  cindy@bcwm.com

Telephone: (913) 685-2300

www.bcwm.com