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Personal finance

Making the 529 decision

Answer a few simple questions to find the right account for your education savings.

6 minute read • April 10, 2024

Personal finance

Education savings

529 education plans

Article

Education

Taxes

College

Page

Sometimes it can be hard to decide how to begin saving for education—especially when there are so many unknowns in play. The biggest one of these may be, "What if we don't end up needing the money in our 529?" Thanks to SECURE 2.0, 529 plans offer the option of rolling up to $35,000 into a Roth IRA for the beneficiary if you don't use it for education*—giving you more flexibility for your loved one's future. We've got a few simple questions that can help you decide if The Vanguard 529 might be right for you.

This decision tree infographic asks a series of yes-or-no questions to help readers determine if The Vanguard 529 Plan aligns with their savings goals. If education is one of the goals you want to save for, then a 529 is one of many options that can help you save for education. If it's not one of your goals, then now might not be the right time for a 529. Consider saving in another type of investment account, like a Uniform Gifts/Transfers to Minors Act (UGMA/UTMA) account, general investing account, or Roth IRA. If you want an account that's just for education savings, then consider a 529 because they are only for education. You can use your 529 assets to pay for any qualified education expense at any time. If you don't want an account that's just for education savings, then a 529 might not be the right option. If tax advantages are a top priority for you, then consider a 529. One of the biggest perks of a 529 is that you can enjoy tax-free growth on your contributions, and withdrawals are tax-free. If tax advantages are not a top priority, then a 529 might not be for you at this time. If you live or pay taxes in the District of Columbia or Alabama, Colorado, Connecticut, Georgia, Idaho, Illinois, Indiana, Iowa, Louisiana, Maryland, Massachusetts, Michigan, Mississippi, Nebraska, North Dakota, New Jersey, New Mexico, New York, Oklahoma, Oregon, Rhode Island, South Carolina, Utah, Vermont, Virginia, Wisconsin, or West Virginia, then your region's 529 plan offers state or district tax benefits that might make it the right choice for you. If you don't live in the District of Columbia or one of those states listed, then consider investing in The Vanguard 529 for flexible, high-quality investment options, low fees, and expert management.

There's a lot to love about The Vanguard 529

If you still have questions about how it can fit into your life, we've got answers. Or if you're ready to join over 350,000 families nationwide as a Vanguard 529 investor, we're ready to welcome you.

Open your 529 account

*Certain restrictions apply, including to whom the assets may be transferred, a required holding period of 15 years, and limits on rollovers of contributions made within the 5 years prior to the rollover. The annual rollover limit is subject to Roth IRA annual contribution limits with a lifetime limit of $35,000 for each 529 account beneficiary. Consult your tax advisor prior to initiating a rollover. This is a provision of SECURE 2.0, passed in December 2022 (effective beginning in 2024) as a follow-up to the Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019.

**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.

***Learn more about your state's 529 plan options here.

Certain conditions may apply. There may be other material differences between products that must be considered prior to investing.

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

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.

For more information about The Vanguard 529 College Savings Plan, call 888-726-4085 or obtain a Program Description (PDF), which includes investment objectives, risks, charges, expenses, and other information; read and consider it carefully before investing. Vanguard Marketing Corporation, Distributor.

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.

For more information about any 529 college savings plan, contact the plan provider to obtain a Program Description, which includes investment objectives, risks, charges, expenses, and other information; read and consider it carefully before investing.

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

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.