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Personal finance

Which account is right for your education savings goals?

It feels like a big decision, but don't worry—it's easy to find an account that has everything your family needs.
9 minute read

529 plans

529 plans are tax-advantaged accounts made specifically for education savings—like college, K–12, trade school, or vocational school.

Most states offer 529 plans, and you can save through any state's plan, no matter where you live. When selecting a 529 plan, you should consider any tax breaks your state offers, plan fees and costs, investment choices, and investment minimums for opening and contributing to the account.

Benefits of a 529

Tax savings

A 529 plan provides federal and state tax benefits, including tax-deferred growth and tax-free withdrawals for qualified education expenses.1

Compare 529 tax benefits by state

Spending options

You can use your 529 savings to pay for tuition and fees for K–­­12, college, grad school, eligible apprenticeships, and trade school; books and supplies; technology costs; and some student loan debt.2



You can save for anyone, even yourself! And if your beneficiary doesn't need the money for education, you can change beneficiaries or roll the money into a Roth IRA. With SECURE 2.0, unused 529 funds can be used for retirement purposes as well. 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.3

Get details on 529 savings accounts

If you're interested in learning about other types of accounts, the table below makes it easy to compare and decide.

See what you need to consider if you're a grandparent or family friend

Custodial accounts under the Uniform Gifts to Minors Act (UGMA) or Uniform Transfers to Minors Act (UTMA) are accounts created under a state's law to hold gifts or transfers a minor has received.

UGMA/UTMA accounts don't have the same state and federal tax benefits as 529 savings plans and could impact financial aid. They do, however, offer some benefits.

Spending options. The account belongs to the beneficiary. The assets must be used for their benefit until they reach adulthood, at which time the beneficiary takes control of the account.4

Flexibility. These accounts are permanent gifts to the beneficiary and aren't specifically designated for education. The account custodian can invest and withdraw funds to use for anything for the beneficiary. Once the beneficiary reaches adulthood, they can use the money however they choose.

A general investing account (or brokerage account) is an individual or joint account that can hold mutual funds, ETFs (exchange-traded funds), stocks, bonds, and more. The money can be used for any expense at any time.

Though general investing accounts don't have the same tax benefits as 529 plans and could impact financial aid, their advantages include:

Spending options. You control the account and can withdraw the money for any reason and at any time.

Flexibility. You can use the money for anything you want, so spending isn't limited to education-related expenses. 

A Roth IRA is an individual retirement account that allows you to make after-tax contributions and withdraw the funds tax-free in retirement. Though Roth IRAs are most commonly used for retirement, they also have certain features that may make them useful vehicles to save for higher education expenses.

Flexibility. As long as it's been 5 years since your first contribution, you can withdraw your Roth IRA contributions and earnings penalty-free whenever you want, for whatever purpose you choose.5 Any unspent funds are still usable for retirement.

Investment options. Roth IRAs allow for a wide selection of investment options, including stocks, bonds, ETFs, CDs (certificates of deposit), REITs (real estate investment trusts), and mutual funds.

Compare your options

Account types for education

There are several different account types you can consider when saving for education with Vanguard. Learn more below to see which one might fit your goals. 

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

Open a Vanguard 529 account

1Earnings 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 after repayments, iii) student loan repayments, or iv) a rollover to a beneficiary's Roth IRA 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.

2State 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.

3Certain 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.

4State rules vary for account registration and age of majority (i.e., when the minor is considered an adult) and the age when the custodianship must terminate.

5Withdrawals from a Roth IRA are tax free if you are over age 59½ and have held the account for at least five years; withdrawals taken prior to age 59½ or five years may be subject to ordinary income tax or a 10% federal penalty tax, or both. (A separate five-year period applies for each conversion and begins on the first day of the year in which the conversion contribution is made.)


For more information about The Vanguard 529 College Savings Plan, visit vanguard.com to 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.

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.

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