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Personal finance

10 things that may surprise you about 529s

Learn more about 529s—one of the most popular education savings account types in the U.S.
7 minute read
May 03, 2024
Personal finance
Education savings
Investing for life events
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.


The SECURE Act 2.0 allows greater flexibility—excess funds from a 529 can now be used to jump-start the beneficiary's Roth IRA savings.1 It's a new world of possibilities for your loved one's future.

Open an account

Thinking about opening a 529?

Here are 10 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 also allow for assets to be used toward K–12 tuition or fees of up to $10,000 per student per year at a public, private, or religious school.2

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.

With SECURE 2.0, unused 529 funds can be used for retirement too. Account owners can incrementally roll over a lifetime maximum of $35,000 (following annual rollover limits) tax- and penalty-free to a Roth IRA for the beneficiary.1

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. But did you know that grandparents can fund a 529 without impacting financial aid eligibility? It's true—thanks to a streamlined FAFSA (Free Application for Federal Student Aid) form that eliminates questions about grandparent contributions.

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.3 What better way to invest in your future?

After a 529 account is opened, everyone can contribute—friends, family, neighbors, or anyone who wants to help—via cash, check, or electronic transfer. And with The Vanguard 529 Plan, family and friends can also use Ugift® to easily contribute $50 or more 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).

More than one account can be opened on behalf of the same beneficiary. For example, if a grandmother already opened a 529 for a grandchild, the child's parent can open one too. 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 schedule automatic, recurring contributions. And the monthly minimum contribution is only $50, which you can increase at any time. Here are some simple ways to save more money each year:

  • Set up automatic yearly contribution increases.
  • Use part of a work bonus or tax refund to make a onetime contribution.

Reminder: You should continue monitoring your asset allocation to ensure it still aligns with your goals.

The Vanguard 529 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 consider a Target Enrollment Portfolio instead, which automatically adjusts to become more conservative as your beneficiary approaches their enrollment date. 

Is The Vanguard 529 Plan right for you?

More than 350,000 families nationwide have chosen The Vanguard 529 Plan to invest in more than half a million futures.4 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.5

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).

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1Certain 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.

2State tax treatment of K–12 withdrawals, apprenticeship program expenses, student loan repayments, and Roth IRA rollovers is determined by the state(s) where the taxpayer files state income tax. Please consult with a tax advisor for further guidance.

3Earnings 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, iii) student loan repayments, or iv) Roth IRA rollovers 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.

4Source: Vanguard. As of December 31, 2023.

5Vanguard average 529 expense ratio: 0.14%. Industry average 529 expense ratio: 0.49%. Average annual asset-based fees for age-based portfolios. Source: ISS Market Intelligence, December 2023.

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

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 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.

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.

Certain conditions may apply.