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Personal finance

What is a 529 plan?

3 minute read

529 savings plans are one of the most popular education savings account types in the US. They let you save for education and enjoy other benefits too. Plans are usually sponsored by states (just about every state has one) and managed by mutual fund companies.

You can save in any state's plan no matter where you live, and you can use your savings to pay for qualified education expenses in any state (and even abroad). 

Tax benefits

 529 plans provide federal tax benefits, including tax-deferred growth and tax-free withdrawals for qualified education expenses.* You may also be able to deduct your contributions from your state income tax (or get a state tax credit) depending on where you live.** 

Spending options

You can use your 529 savings to pay for tuition and fees for K—12***, college, grad school, and trade school; books and supplies; technology costs; and even student loan repayments.* 


As the account owner, you can save for anyone (even yourself!). You maintain control of the account and can even transfer it to another beneficiary.** If your beneficiary doesn’t end up needing the money for education expenses, you can still access your 529 savings. Keep in mind you’ll have to pay penalties on any earnings if you use the money for non-qualified expenses.†

High contribution limits

Unlike IRAs, there aren’t annual contribution limits for 529 plans. The aggregate amount you can contribute depends on your plan, but lifetime contribution limits are high (generally between $235,000 and $529,000 per beneficiary). (Source: How much can you contribute to a 529 plan)

Low impact on financial aid

As long as you (as the parent) are the account owner and your child is a dependent, 529 savings will have a much lower impact on financial aid for higher education than a different type of account opened in your child's name. 

Choice of plans and investments

You can save in any state's plan and use your savings to pay for qualified expenses at any eligible school in the U.S. or abroad. You can also select the investment strategy you’re most comfortable with: Choose your own asset mix or select a target enrollment portfolio that becomes more conservative as your beneficiary gets closer to their expected enrollment year.


What if you don’t end up needing your savings?

View 529 FAQs

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*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.

**The availability of tax or other benefits may be contingent on meeting other requirements.

*** State tax treatment of K–12 withdrawals is determined by the state(s) where the taxpayer files state income tax. Please consult with a tax advisor for further guidance.

If you received a tax deduction on your contributions, your state might require you to pay it back if you use the money for expenses that aren't qualified. Some states also adjust the amount owed for inflation.

For more information about any 529 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. If you are not a taxpayer of the state offering the plan, 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. Vanguard Marketing Corporation serves as distributor for some 529 plans.

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