In a recent conversation, my colleague Trent asked me to walk through what a genuinely different approach to education planning looks like. The answer surprised him, and it surprises most of the clients we work with, too.
Take a few minutes to watch the video below before reading on. The math is straightforward, but the mindset shift underneath it is what tends to change things.
When the average person thinks about 529 accounts, they usually think one generation deep. Mom and Dad accumulate money, the child goes to college, and the account empties. The whole exercise becomes a guessing game. Did we put too much in and oversave? Are we putting in too little, and will we be scrambling at the end? That framing makes the 529 feel like a narrow tool with a narrow purpose.
Our view is different. The 529 account is one of the most underutilized multigenerational wealth vehicles available to families, and too many people are using only a small fraction of its potential to compound.
Think in Compounds, Not Tuition Bills
Here is a number worth sitting with. If we put $10,000 away for a 20-year-old today, that money has the potential to grow to 64 times its value by the time that person reaches 65 (The Rule of 72 is a helpful guideline, not a rule). That is not a projection designed to impress you. That is what long-term, tax-deferred compounding is capable of when you give it enough time and leave it alone.
When we start thinking about education planning through that lens (compound growth over decades rather than tuition bills over six years), the entire strategy changes. The goal is no longer to hit a target and stop. The goal is to keep the money growing for as long as the family benefits from it.
What Happens to the Money That Is Left Over
One of the most powerful features of the 529 account is what you can do with the balance after the child finishes school. Once a beneficiary completes their education, current rules allow up to $35,000 from a 529 account to be rolled over into a Roth IRA in the beneficiary's name. For a young adult in their early twenties, that $35,000 Roth IRA contribution is extraordinarily valuable.
Again, if we use the Rule of 72 as an illustrative measuring stick, that money has the potential to double four, five, or six times between now and retirement–all tax-free if used for qualifying educational expenses. That’s more than just college expenditures by the way! The 529 contribution that started as education savings becomes the foundation of a retirement account that can carry that child through decades of financial life.
For families considering helping their children build serious wealth early, this is one of the most efficient paths available. A $300,000 Roth IRA portfolio by age 30, funded in part by a rollover like this, puts that child on a potential trajectory to multiple millions by retirement with no additional money invested. The magic of compounding, anyone?
What Happens When There Is Even More Left Over
If the balance exceeds that $35,000 rollover threshold, the money does not have to stop working. The account owner can be changed from parent to child, and the beneficiary can be updated to the grandchild. The investment objective gets adjusted to match the new beneficiary's age and timeline, and the money simply continues compounding for the next generation.
There is no forced liquidation, no tax penalty, and no expiration date on the account's usefulness. The family just keeps accumulating.
This is the part of the 529 conversation that is not discussed nearly enough in common financial planning, and it is the part that we think matters most. Families who fund these accounts aggressively and think about them as multigenerational vehicles are building something that potentially compounds not just financially, but structurally. Each generation inherits a head start.
The Framework We Use
When we sit down with clients on education planning, the conversation usually moves through three layers.
- Fund generously now. Overusing the 529 is rarely a mistake. The flexibility built into current rules means excess funds have meaningful destinations, whether that is a Roth IRA rollover, a change of beneficiary, or continued growth for grandchildren.
- Plan the Roth conversion in advance. The $35,000 rollover from a 529 to a Roth IRA is subject to annual contribution limits and requires the account to have been open for at least 15 years. Building that timeline into the plan from the beginning makes the conversion seamless when the time comes.
- Change the beneficiary rather than closing the account. When a child completes their education, and the rollover is done, resist the impulse to close the account. Transfer ownership and update the beneficiary to the next generation. The compounding play continues, and the family's wealth potential compounds with it.
The Bigger Vision
What I am really describing here is a shift from education planning to family wealth architecture. The 529 account, used with intention, is not a tuition savings vehicle. It is a multigenerational compounding engine that can touch your children's education, your grandchildren's education, and the retirement security of everyone in between.
So many families are leaving an enormous amount of that potential on the table simply because no one has shown them the full picture. That is the Envizion More conversation we love having: not just what the money needs to do right now, but what it can build across generations if the plan is designed with that in mind from the beginning.
Ready to think about your family's education plan as something larger than a tuition account? We would love to walk through what that looks like for your situation.