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Investing for life events

9 things that may surprise you about 529s

A 529 plan is a popular education savings account type that comes with tax benefits and investment options. Read a few surprising benefits of 529s, and learn more about The Vanguard 529 plan.
7 minute read
April 29, 2022
Investing for life events
Education savings
529 education plans

A 529 plan is a state-sponsored, tax-advantaged education savings account that offers tax benefits and spending options. They’re one of the most popular education savings account types in the U.S.

Thinking about opening a 529? Here are 9 things you should know (and a few might surprise you):

While many high school graduates go on to attend traditional universities, some have different plans for their future, like attending trade school or studying abroad. Whatever higher education looks like for them, a 529 plan can help fund it. Some 529 plans allow for assets to be used towards K–12 tuition and fees of up to $10,000 per student per year at a public, private or religious school.*

Your investment can be used to pay for tuition, room and board, books, supplies, and other qualified expenses at any accredited vocational school, college, or graduate school in the U.S. or abroad.

You can change the account beneficiary anytime as long as they’re a qualified family member. For example, if a child decides not to go to college after high school, the money can go to someone else, like a sibling, stepchild, or parent who has plans to attend in the future.

Parents aren’t the only ones who can open a 529 plan and start saving. Almost anyone can, including grandparents, other relatives, and friends.

If you have plans to go back to school, you can open a 529 account for yourself. Yes, the account owner and beneficiary of the savings account can be the same person. Up to $10,000 from a 529 plan can also be used for student loan repayment.** What better way to invest in your future?

After a 529 account is opened, everyone can contribute—friends, family, neighbors—anyone who wants to help via cash, check, or electronic transfer. With The Vanguard 529 College Savings Plan, family and friends can use Ugift® to easily contribute online. They just choose the amount they want to give and it’s deposited directly into the account. It’s the perfect way to celebrate (think birthdays, showers, and graduations).

You read that right: More than one account can be opened on behalf of the same beneficiary. For example, if Grandma already opened a 529 for a grandchild, the child’s parent can open one too. That way they’re both saving for future education expenses and still eligible for state tax deductions.

Once a Vanguard 529 is open, it’s easy to “set it and forget it” with automatic, recurring contributions. And the monthly minimum contribution is only $50, which is probably less than you spend on streaming services to watch all of your favorite shows. Reminder: You should continue monitoring your asset allocation to ensure it still aligns with your goals.

The Vanguard 529 College Savings Plan has options to suit how you approach investing. Hands-on investors can strategize and choose an asset mix that fits their timeline and risk tolerance. If you’d rather not manage your investments, you can choose a Target Enrollment Portfolio instead, which automatically adjusts to become more conservative as your beneficiary approaches their enrollment date.

How do I know if The Vanguard 529 Plan is right for me?

More than 300,000 families nationwide have chosen The Vanguard 529 College Savings Plan to invest in more than half a million futures.† With The Vanguard 529, investors get access to high-quality investment options and low costs over the life of the plan, leaving more money to put toward education. In fact, our costs are among the lowest in the industry.††

Check out this decision tree to see if The Vanguard 529 is a good fit for you.

Already know you want to open a Vanguard 529?

When you’re ready to start saving, you can open a Vanguard 529 online. You’ll just need these 3 things:

  • Basic information: Make sure you have the beneficiary’s Social Security number, birth date, and address. By the way, parents-to-be can open an account and add their child’s Social Security number later.
  • Investment choices: Consider a Target Enrollment Portfolio based on the year closest to when your beneficiary expects to start attending school, or assemble an investment strategy from our individual portfolios.
  • Bank information: You’ll need your bank account and routing numbers if you plan to make your first contribution through an electronic bank transfer.

The sooner you start, the more time you’ll have to save. So whenever you’re ready, open an account to begin investing in their future (or yours).

The Vanguard 529 College Savings Plan is a Nevada Trust administered by the office of the Nevada State Treasurer.

Certain conditions may apply.

*State tax treatment of K–12 withdrawals, apprenticeship program expenses, and student loan repayments is determined by the state(s) where the taxpayer files state income tax. Please consult with a tax advisor for further guidance.

**Earnings on nonqualified withdrawals may be subject to federal income tax and a 10% federal penalty tax, as well as state and local income taxes. The availability of tax or other benefits may be contingent on meeting other requirements. State tax treatment of withdrawals used for i) expenses for tuition in connection with enrollment or attendance at an elementary or secondary public, private, or religious school, ii) expenses related to apprenticeship programs, or iii) student loan repayments is determined by the state(s) where the taxpayer files state income tax. If you are not a Nevada taxpayer, please consult with a tax advisor.

†Source: Vanguard.

††Vanguard average 529 expense ratio: 0.14%. Industry average 529 expense ratio: 0.53%. Source: ISS Market Intelligence, as of December 2021.

For more information about The Vanguard 529 College Savings Plan, obtain a Program Description, which includes investment objectives, risks, charges, expenses, and other information; read and consider it carefully before investing. Vanguard Marketing Corporation, Distributor.

The Vanguard Group, Inc., serves as the Investment Manager for The Vanguard 529 College Savings Plan and through its affiliate, Vanguard Marketing Corporation, markets and distributes the Plan. Ascensus Broker Dealer Services, LLC, serves as Program Manager and has overall responsibility for the day-to-day operations. The Plan’s portfolios, although they invest in Vanguard mutual funds, are not mutual funds. Investment returns are not guaranteed and you could lose money by investing in the Plan.

If you are not a Nevada taxpayer, consider before investing whether your or the designated beneficiary’s home state offers any state tax or other benefits that are only available for investments in such state’s qualified tuition program. Other state benefits may include financial aid, scholarship funds, and protection from creditors.

Ugift® and the Ugift logo are registered service marks of Ascensus Broker Dealer Services, LLC.

All investing is subject to risk, including the possible loss of the money you invest.