Big Changes in 529 Plans Every Parent Should Know

529 plans just got a major upgrade. From Roth rollovers to expanded K–12 limits, Brandon breaks down what families need to know to maximize their savings.

Find out:

• The benefits of a 529 plan for funding education

• What happens if your child doesn't end up attending college

• How the One Beautiful Bill Act expanded eligible education expenses

• How much you can withdraw for K-12 education each year

Hi, and welcome to another edition of Coffee With Waymark.

In my last video, I was preparing for the birth of our third child and gave you a quick overview of things I was planning for financially before the baby came, as well as after the baby came. And sure enough, we are about eight months after the baby and I wanted to recap some of those things.

Some of the big items were planning for cash flow, budgeting, updating beneficiaries, and reviewing life insurance to make sure you have enough coverage.

Today’s video, I wanted to focus more on education planning, as it's never too early to start funding and planning for your little ones’ education. I want to start by talking about 529 plans in particular. So, I wanted to review a quick overview and the basic benefits of a 529 plan and why we use them.

529 Plan Basic Benefits

First and foremost, the biggest benefit is the tax-deferred growth. After you fund the account, the funds will grow tax-deferred, meaning no taxes while the money is growing. Even more importantly, as long as you use the funds for qualified education expenses, the withdrawals come out tax-free.

It’s similar to a Roth in that regard—you put money in, it grows tax-deferred, and withdrawals are tax-free. Qualified expenses include college tuition, books, housing, computers, meal plans, and other expenses. This area continues to expand, with more and more expenses now being covered.

Another big benefit people aren’t always aware of is the flexibility of a 529 plan. Most people think you set it up for your child and it’s theirs and only theirs, which isn’t true. You can switch beneficiaries. For example, if I name my son and he doesn’t need the funds, I can change the beneficiary to one of my daughters—or even to a parent. There’s a lot of flexibility in who you can choose and change after opening the plan.

Another aspect is that they’re no longer just for college. You can use up to $10,000 per year for K–12 education.

Recent Changes

Those are some of the basics, but I also wanted to share some of the recent changes to 529 plans, as there’s been some new legislation this year.

A lot of clients say, “I don’t want to overfund my 529 because what if my child doesn’t use it or go to college?” If you take money out for something other than qualified expenses, it’s taxed and subject to a 10% penalty. But with the SECURE Act 2.0, there’s now a huge benefit. You can roll up to $35,000 from a 529 plan into a Roth account for that beneficiary.

There are a few caveats:

• The plan must be open for at least 15 years. So if you start it early, that gets the clock running.

• The rollover amount can’t exceed the current Roth contribution limit. For example, this year, if you’re under age 50, the max you can contribute to a Roth is $7,000. So, you could do $7,000 this year, then next year do another rollover, and continue each year until you reach that $35,000 limit.

• The funds must be in the 529 plan for at least five years—you can’t open it 15 years ago, dump a bunch of money in, and immediately roll it out.

• The beneficiary must have a Roth account and earned income. So, if they earned $5,000 that year, you can only roll over $5,000 from the 529 to the Roth. They can continue to do that each year they have earned income until reaching the $35,000 total.

Another legislative change came earlier this year when the One Beautiful Bill Act was signed into law.

Two things they’re expanding are:

• Allowing more withdrawals for eligible education expenses like licensing, certifications, and other programs.

• Starting in 2026, increasing the K–12 withdrawal limit from $10,000 to $20,000 per year.

These changes continue to expand how 529 plans can be used—not just for college but also for post-college certifications and training.

I’ve already started plans for all three of my kids. It’s never too soon to start, especially with rising education costs. Time is on my side, giving their accounts more time to grow. That’s the biggest benefit—the tax-deferred growth and the power of starting early.

Hopefully this was helpful and educational. As always, be well and do good.

Brandon Cardarelli, CFP® is Associate Advisor for Waymark Wealth Management and has been on the Waymark team for his entire professional career of over 15 years. He joined Waymark shortly after graduating from Bryant University, where he earned his Bachelor of Science degree in accounting.

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The opinions voiced in this video are for general information only and are not intended to provide specific advice or recommendations for any individual.