Saving for college through a 529 Plan is a smart, tax-advantaged strategy. But what happens if your child graduates and there’s money left over in the account?

There are several ways to use up leftover 529 plan funds. It’s important to note that some options may have tax implications; therefore, we strongly recommend consulting with a financial professional before making any major moves.

Here are five different ways you can use the extra money in your 529 plan.

Option #1: Change the Beneficiary

One of the most flexible aspects of a 529 plan is the ability to change its beneficiary to another qualifying family member without tax consequences. For example, you can:

• Change the beneficiary to a sibling if they are still in or heading to college.
• Change the beneficiary to yourself if you plan to pursue further education.
• Change the beneficiary to another qualifying relative, such as a niece, nephew, or even your spouse. (Remember that up to $10,000 can be used for tuition at elementary, middle, or high school.)

This option preserves the tax-free growth and qualified distribution benefits for education.

Option #2: Keep It in the Child’s Name for Future Generations

You can leave the funds in the existing beneficiary’s name and keep the account invested to grow over time. Later, when your child has children of their own, you can change the beneficiary to your grandchild.

This effectively creates a perpetual educational trust within the 529 plan, continuing the legacy of funding higher education while allowing for decades of tax-free growth.

However, the downside to this option is that no one can predict the future. If your child never has children of their own, you may be left reevaluating what to do with the funds down the line. Fortunately, the next option may be useful.

Option #3: Convert it to a Roth IRA.

As of 2024, through a provision of the Secure 2.0 Act, you may convert up to $35,000 (lifetime maximum amount)  from a 529 plan into a Roth IRA for the beneficiary over their lifetime, provided certain conditions are met:

• The 529 account must have been open for at least 15 years.
• Contributions (and earnings on those contributions) made within the last five years are not eligible for rollover.
• The Roth IRA must have the same beneficiary as the 529 plan.
• Annual contribution limits count towards annual Roth IRA contribution limits.
• The beneficiary must have earned income at least equal to the rollover amount for that year, although the Roth IRA income limits do not apply.

This option effectively repurposes unused education savings into retirement savings, allowing the funds to continue growing tax-free and be used for the beneficiary’s long-term financial security.

Option #4: Take a Non-Qualified Distribution

If you choose to withdraw the leftover funds for non-educational purposes:

• You will pay ordinary income tax (Federal and State) on the earnings portion of the withdrawal.
• You will also incur a 10% Federal tax penalty on those earnings.

The original contributions, however, can be withdrawn without Federal tax or penalty because they were made with after-tax dollars. While this is not ideal, it may make sense if the amount is small or if you have other priorities that outweigh the penalties.

Option #5: Use for Continuing Education or Qualified Expenses Beyond Tuition

529 funds can be used for a variety of education-related expenses, including:

• Graduate school
• Trade or vocational schools
• Certain study abroad programs
• Up to $10,000 of student loan repayment (lifetime limit per beneficiary and per sibling)
• Up to $10,000 per year for K-12 tuition ($20,000 beginning in 2026), including materials, textbooks, tutoring outside of the home, annual enrollment fees, and educational therapy
• Expenses for workforce training or continuing education credentialed programs (new for 2025 and beyond)

Making the Best Decision for Your Family

Each option has financial and tax considerations. The best choice depends on your family’s circumstances, goals, and timeline. Before taking action, consult with your financial planner to coordinate this decision within your broader financial plan.