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529 to Roth IRA: The Ultimate Rollover Guide (New IRS Rules for 2025!) – Don't Leave Free Money on the Table!

  529 to Roth IRA: The Ultimate Rollover Guide (New IRS Rules for 2025!) – Don't Leave Free Money on the Table! Alright, Future Millionaires and Master Budgeteers! Your favorite financial trainer is here, ready to drop some serious knowledge bombs that will make your wallet sing and your future self high-five you. Today, we're tackling a game-changer that's got the financial world buzzing: how to roll over those glorious 529 plan funds into a Roth IRA . Yes, you heard that right! The IRS, in a rare moment of what appears to be pure financial generosity, has cooked up some new rules for 2025 that could transform your leftover education savings into a powerful retirement war chest. Think of it like this: your college fund just got a superhero upgrade, and its new superpower is tax-free retirement growth . 🦸‍♀️💰 So, if you’ve been sweating about overfunding your kid’s 529, or if Junior decided that becoming a TikTok star was a more viable career path than a neurosurgeon (hey...
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The Best 529 Plans in 2025: Top States and Investment Options That Make Saving for College (Almost) Fun



The Best 529 Plans in 2025: Top States and Investment Options That Make Saving for College (Almost) Fun

"College may cost a fortune, but saving for it shouldn’t feel like a second tuition." 💸

Welcome back, budget rockstars! If you're saving for your kid’s (or your own) education, you've probably heard of the legendary 529 plan—the financial unicorn that helps you grow money tax-free for education expenses. But here's the kicker:

👉 Not all 529 plans are created equal.

Some are investment beasts with low fees and high performance. Others? Let’s just say they need a financial makeover. Today, we’re diving deep into the best 529 plans of 2025, which states are winning the savings game, and how you can choose the right plan—even if you don’t live there.

So grab your coffee (or calculator), because class is in session.

🎓 Quick Refresher: What’s a 529 Plan, Anyway?

A 529 plan is a tax-advantaged investment account specifically for education expenses. You contribute after-tax dollars, your investments grow tax-free, and if used for qualified education costs—like tuition, books, even apprenticeships—you don’t pay tax on withdrawals.

There are two main types:

  1. Education Savings Plans – Think of these like Roth IRAs for education. You pick investments, the account grows, and you cash out for expenses.

  2. Prepaid Tuition Plans – These let you lock in tuition prices at today’s rates for certain in-state schools (fewer options, less flexibility).

Here’s the kicker: You can invest in any state’s 529 plan, no matter where you live!

🔥 What Makes a 529 Plan “The Best” in 2025?

Before we rank the top states, let’s define what makes a 529 plan great:

✅ Low fees – High fees eat your future faster than a freshman eats pizza.
✅ Strong investment options – Target-date funds, index funds, ESG options, etc.
✅ Tax benefits – State tax deductions or credits for residents.
✅ Ease of use – Good online interface, auto-deposits, mobile app, etc.
✅ Flexibility – Options for changing beneficiaries or rolling over to a Roth IRA (yes, that’s new in 2024—more on that below 👇)

🏆 The Best 529 Plans in 2025 (Even If You Don’t Live There)

Here are the top performers—based on independent ratings from Morningstar, SavingForCollege.com, and NerdWallet. These plans combine value, performance, and straight-up usability.

1. Utah’s my529 Plan

Why it rocks:

  • Consistently top-rated by Morningstar

  • Offers Vanguard and DFA index funds

  • Customizable glide paths (choose your own adventure-style!)

  • Super low fees: as low as 0.11%

  • No minimum contribution

State tax benefit: Utah residents get a 5% tax credit

Ideal for: DIY investors and out-of-staters who want top-tier customization

2. New York’s 529 Direct Plan

Why it rocks:

  • Vanguard-managed funds (low cost, high quality)

  • Age-based and individual fund options

  • Annual fees: ~0.13%

  • Strong performance history

State tax benefit: Up to $10,000 deduction for married NY filers

Ideal for: Simple savers who want strong returns without the fuss

3. California’s ScholarShare 529

Why it rocks:

  • No state income tax (so no deduction—BUT open to all)

  • Invesco-managed with solid age-based portfolios

  • Zero enrollment fees or maintenance charges

  • Offers gift contribution tools (great for birthdays)

State tax benefit: None, but plan quality makes up for it

Ideal for: Californians and anyone seeking a sleek, high-performing plan

4. Ohio’s CollegeAdvantage 529

Why it rocks:

  • Huge fund selection: Vanguard, DFA, and even CDs!

  • Age-based and individual options

  • Unique guaranteed savings fund (low-risk option)

State tax benefit: $4,000 deduction per beneficiary per year (carry forward extras!)

Ideal for: Risk-diverse families and conservative investors

5. Michigan’s 529 (MESP)

Why it rocks:

  • Vanguard-managed, strong performance, very low fees (avg 0.10%)

  • Clean website and planning tools

  • No maintenance fees

State tax benefit: Up to $10,000 deduction for married filers

Ideal for: Anyone who wants an elite plan with automatic investment options

💡 Budget Trainer’s Tip: You Don’t Need to Live in the State

One of the biggest money myths?
"You have to use your home state's 529 plan."

🚫 False.

While some states offer deductions or credits if you use their plan, you’re not locked in. In fact, many people choose another state’s plan based on:

  • Better investment choices

  • Lower fees

  • Easier-to-use platforms

You can live in Texas, use Utah’s plan, and send your kid to college in Spain. The 529 doesn’t care.

🔄 New for 2025: 529 to Roth IRA Rollovers

🚨 Game-changer alert: Starting in 2024 (thanks, SECURE Act 2.0), you can roll over leftover 529 funds into a Roth IRA for the beneficiary!

Rules:

  • Max lifetime rollover: $35,000

  • 529 must be at least 15 years old

  • Annual Roth IRA limits still apply

  • Funds must come from contributions (not earnings)

Translation: Your kid doesn’t go to college? You didn’t waste the savings—you just funded their retirement. 🙌

👨‍👩‍👧 Real-World Example: The Global Family Plan

The family: Jamal and Sofia live in Dubai. Their son Yusuf wants to study in Canada.

They open Utah’s my529, contribute $200/month for 15 years. When Yusuf starts college:

  • The account has grown to ~$60,000 (7% average return)

  • They use the funds tax-free to pay for tuition, room, books—even a laptop

  • If Yusuf gets a scholarship? They roll $35K into his Roth IRA.

🌍 *529 plans aren’t just for U.S. families—*international investors can use them if they have a U.S. Social Security number or ITIN.

Global family. Smart plan. Bright future.

🔍 529 vs. Coverdell ESA vs. UTMA – Quick Comparison

Feature 529 Plan Coverdell ESA UTMA Account
Tax-Free Growth ✅ Yes ✅ Yes ❌ No
Contribution Limit High (varies by state) $2,000/year No limit
Control Parent retains Parent until 18/21 Child gains at 18/21
Qualified Use Education (K-12 +) Education only Anything for minor
Financial Aid Impact Low impact Low High

For pure education savings, 529 plans still reign supreme in 2025.

🧠 Reflect Before You Invest

Here’s the Better With a Budget method of thinking critically about your 529 choices:

  • Are you choosing a plan because it has the best tax perks—or the best performance?

  • Is your child definitely college-bound—or would you prefer flexibility like Roth rollovers?

  • Do you want to set it and forget it—or manage your portfolio like a finance pro?

  • Would other family members (grandparents, aunts, etc.) want to contribute?

The best plan isn’t the one your neighbor picked. It’s the one that fits your family’s goals and style.

✅ Your Action Plan: Start That 529 Like a Pro

  1. Pick your top 2 or 3 state plans from the list above

  2. Compare fees, funds, and user experience (check SavingForCollege.com)

  3. Decide whether to prioritize state tax benefits or investment performance

  4. Open the account, automate contributions, and tell the grandparents (they can gift directly!)

💡 Don’t wait until your kid’s a teenager to get started. Even $25/month now can mean thousands later.

📚 Suggested Reading & Free Tools

🎯 Final Word: Don’t Just Save—Strategize

You’re not just “saving for college.” You’re building options. Flexibility. Freedom. And peace of mind.

Whether your kid becomes a doctor, a coder, or a kombucha artisan—529 plans let you say, "We planned for this."

💬 What’s Your Next Step?

  • Already using a 529? Share your experience in the comments.

  • Still undecided? Use the comparison tool and tell us your top contenders.

  • Inspired to act? Tag a friend and start a 529 challenge together!

📣 Because when it comes to education—and money—planning beats panic. Every. Single. Time.


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