How you could be saving yourself short if you're not taking advantage of a 529 account
The cost of not saving for education in a 529

Most families believe higher education is an important investment in a child's future.* And with education costs rising, parents and grandparents who save early and often can help give their loved one the best chance of success. However, 55% of parents use savings, investment, and retirement accounts not designed specifically for education savings.*
Here's the bottom line: You could be saving yourself short if you're not taking advantage of a 529—an account that's built for education savings.
What it could cost you to miss out on 529 plan benefits
Families who want to be as prepared as possible for education costs should consider saving in a 529 account. If you're using an account that doesn't offer the same benefits as a 529, you could miss out on tax advantages** and potential growth.*** For example, here's how the difference in accumulated savings might look:
Note: This hypothetical example of a long-term average return does not represent the return on any particular investment and the 6% rate is not guaranteed. It is an illustrative example of a long-term average return on a balanced investment of stocks and bonds. The account comparison assumes 4% annual capital and 2% annual income returns. After-tax return assumes a complete liquidation of the account, including applicable taxes. Calculations assume a 22% federal income tax and 5% state income tax, along with a combined 20% capital gains tax rate. Source: Vanguard. Note that 529 accounts will be limited to the investments offered by the plan sponsor, but generally offer well-diversified index investments. Market returns are not constant and will fluctuate annually. Lower tax rates on dividends and capital gains may make the taxable investment more favorable and the difference between taxable and tax-deferred ending balances less. Any future changes in the tax treatment of investment earnings or a rate of return that is lower than the assumed rate of return may further impact the comparison. Investors should consider their time horizon and current and expected future tax rates before making an investment decision. The 529 ending balance calculation assumes proceeds are used for qualified expenses as defined by the Internal Revenue Code and discussed in the plan’s Official Statement. If this were not the case, the ending balance, and the difference between account balances, could be lower due to applicable penalties and taxes.
Pursue higher education with less of a debt burden
Parents who understand firsthand the burden of student loans may be even more inclined to find a better way to save for a loved one's higher education. Imagine helping make it possible for your child to graduate from the university or trade school of their choice and start their career without the stress of student loans.
Opening a 529 is a way to give yourself and your family some assurance that you're doing everything you can to prepare them for higher education and beyond. Once you've opened a 529 account, every investment you make gets you closer to minimizing or even avoiding student loan stress in the future.
529 plans are more flexible than you might think
Your loved one may not know yet what they want to do in the future. Thankfully, a 529 account provides them with options. In fact, a 529 is flexible enough to accommodate a variety of educational paths, including trade schools, 4-year universities, and graduate programs. Some 529 plans can even be used to pay for K–12 tuition and fees of up to $10,000 per student per year at a public, private, or religious school.†
Account owners will also be allowed to roll over 529 plan assets to a Roth IRA for the beneficiary beginning in 2024, with certain restrictions including a holding period of 15 years.††
Here are a few more things to know about 529s. Some might surprise you!
Ready to open a 529?
For more than 45 years, Vanguard has helped investors stay the course, no matter what the markets are doing. And for nearly 25 years, Vanguard has been helping families use 529 plans to prepare for higher education. The Vanguard 529 comes with high-quality investment options, and our costs are among the lowest in the industry.†††
If you decide The Vanguard 529 is a good fit for you, here are some time-saving tips for getting started:
- Basic information. Have the beneficiary’s Social Security number, birth date, and address (or start with your information and change it to the beneficiary's later).
- Investment choices. Choose an expertly assembled Vanguard Target Enrollment Portfolio, or build your asset allocation from our individual portfolios.
- Bank information. Enter your bank account and routing numbers if you plan to make your first contribution through an electronic bank transfer.
330,000+ families use The Vanguard 529 to save for more than half a million futures.