National 529 College Savings Day: Maximizing Education Savings

Today, May 29, is National 529 College Savings Day—a timely reminder for families to explore the powerful advantages of 529 plans for education savings. With college costs continuing to rise, understanding the benefits, new rollover rules, and innovative savings strategies can help families maximize their education funds and gain financial security.

What Is a 529 Plan?

A 529 plan is a state-sponsored, tax-advantaged savings account designed to help families save for a wide range of education expenses. Contributions grow tax-deferred, and withdrawals are tax-free when used for qualified expenses, including college tuition, fees, room and board, books, computers, and even up to $10,000 per year for K–12 tuition or up to $10,000 in student loan repayments per beneficiary.

Key Benefits:

•               Tax-Free Growth: Earnings grow free from federal taxes, and withdrawals for qualified education expenses are not taxed.

• State Tax Incentives: Many states offer tax deductions or credits for contributions to their 529 college savings plans.

•               Flexible Use: Funds can be used for college, K–12 tuition, apprenticeships, and certain student loan repayments.

• Parental Control: The account owner (often a parent or grandparent) maintains control of the funds, which do not count as student assets for federal aid calculations, thereby preserving financial aid eligibility and giving parents a sense of empowerment.

• Low Maintenance: Plans offer age-based or target-enrollment investment options that automatically adjust as the student approaches college age, making it a hassle-free and convenient option for families.

New Rollover Rules: 529 to Roth IRA

A significant change in 2024 allows unused 529 funds to be rolled over tax-free and penalty-free into a Roth IRA for the beneficiary, thanks to the SECURE 2.0 Act. A Roth IRA is a retirement savings account that offers tax-free growth and tax-free withdrawals in retirement, while a 529 plan is specifically for education savings. This rollover option offers families peace of mind if a child receives a scholarship, attends a less expensive school, or chooses not to pursue higher education.

Key Rollover Provisions:

•               The 529 must have been open for at least 15 years.

•               The beneficiary must have earned income equal to or greater than the rollover amount.

•               Rollovers are subject to the annual Roth IRA contribution limit ($7,000 in 2025, plus a $1,000 catch-up for those 50+).

• There is a $ 35,000-lifetime cap per beneficiary for these rollovers.

•               Contributions made in the last five years are not eligible for rollover.

This new rule means families can save confidently, knowing that leftover funds can help jump-start their child's retirement savings.

Tips to Maximize Your 529 Plan

•               Start Early and Contribute Regularly: The earlier you start, the more you benefit from tax-free compounding. Even modest monthly contributions can add up to a significant amount over 18 years.

•               Automate Savings: Set up automatic contributions to build your account steadily and take advantage of dollar-cost averaging.

•               Take Advantage of Gifting: Encourage friends and family to make gifts to your child’s 529 plan for birthdays, holidays, or graduations. Many plans offer gifting platforms for easy contributions.

•               Review State-Specific Benefits: While you can invest in any state’s plan, check your home state’s plan for additional tax benefits or incentives.

•               Adjust Contributions as Life Changes: Increase contributions when you have extra funds, such as after paying off daycare or receiving a tax refund or bonus.

•               Coordinate with Financial Aid: 529 assets are considered parental assets for federal aid, which is more favorable than student-owned assets. Spend 529 funds before borrowing to maximize aid eligibility.

•               Use for a Wide Range of Expenses: 529 plans can cover tuition, fees, books, computers, room and board, K–12 tuition, apprenticeships, and student loan repayments (subject to limits).

Recent 529-Day Promotions

Many states and plan providers celebrate 529 Day with special bonuses, lower minimums, or informational webinars to help families get started. For example, Michigan and California are offering account-opening bonuses and reduced contribution minimums this week.

Conclusion

National 529 Day is the perfect opportunity to open or review a 529 plan and take advantage of new rules and incentives. Starting early, saving consistently, and staying informed about the latest features can help you give your child the gift of education—and financial flexibility for the future.

• Sources:
  Regions Bank:
  https://www.regions.com/insights/personal/article/7-powerful-benefits-of-529-plans
• Saving for College (529 to Roth IRA):
  https://www.savingforcollege.com/article/roll-over-529-plan-funds-to-a-roth-ira
• Michigan Treasury:
  https://www.michigan.gov/treasury/news/2025/05/27/michigan-celebrates-529-day-by-creating-more-opportunities-for-college-savings-for-families
• Saving for College (Maximize 529 Benefits):
  https://www.savingforcollege.com/article/top-10-ways-to-maximize-529-plan-benefits
• The Education Plan (Qualified Expenses):
  https://theeducationplan.com/basics/529-qualified-expenses
• The Education Plan (529 Day Tips):
  https://www.theeducationplan.com/celebrate-national-529-day-with-these-savings-tips
• Invesco (Roth IRA Rollovers):
  https://www.invesco.com/education-savings/en/roth-ira-rollover-potential.html
• College Savings Foundation:
  https://collegesavingsfoundation.org/college-savings-landing/
• Investopedia (Maximize Student Aid):
  https://www.investopedia.com/articles/personal-finance/061616/529-strateges-maximize-student-aid-options.asp
• T. Rowe Price:
  https://www.troweprice.com/personal-investing/resources/insights/how-529-plans-can-unlock-a-range-of-education-opportunities.html
• SC&H Group:
  https://www.schgroup.com/insights/blog/wealth/grow-529-college-savings-plans-with-7-tips/
• Fidelity:
  https://www.fidelity.com/viewpoints/abcs-of-college-savings-plans

Disclosure:
The information provided in this article is for informational purposes only and does not constitute investment, legal, or financial advice. The content is not intended as a recommendation to buy or sell any security or investment product. Readers should consult with qualified financial, legal, and tax advisors before making any investment decisions.

The views and opinions expressed are based on sources believed to be reliable, but their accuracy or completeness is not guaranteed. Any forward-looking statements are based on current expectations and projections, which may change without notice.

Investing involves risk, including the potential loss of principal. Past performance does not guarantee future results. The strategies or investments discussed may not be suitable for all investors.

This material is not intended to serve as personalized tax, legal, or investment advice, as the availability and effectiveness of any strategy depend on your individual facts and circumstances. Duncan Williams Asset Man