College Savings

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College savings: A gift that can last a lifetime

June 06, 2014

If your child has an important event coming up—such as a birthday, religious milestone, or simply heading off to elementary school—consider encouraging friends and family to celebrate by making an investment in his or her future.

These days, many people feel that a college education is virtually essential for lifelong success, but the simple truth is that the costs can be enormous. There's no need to feel overwhelmed, however. College can be affordable if you plan ahead and take action. And one of the most effective ways to save for college is through a 529 savings plan.

529 plans have tax advantages,* high contribution limits, and investment flexibility—a combination you won't find with other college savings options. Their popularity has surged in recent years. As of December 2013, American families had almost $230 billion invested in 529 plan accounts, according to the College Savings Plans Network.

Encouraging gifts to an existing 529

If your child already has a 529 plan account with Vanguard, Ugift® lets you send contribution instructions to loved ones by e-mail or regular mail.

To use Ugift:

1. Log on to vanguard.com and select the appropriate 529 account number.
2. Click the Ugift icon or link, then follow the step-by-step instructions.

Be aware that contributing to an existing 529 account means the contributor won't be able to take advantage of the tax benefits normally available to 529 plan account owners.

Opening a 529 is easy

Anyone can open a 529 plan account—parents, grandparents, other relatives, and friends. Account owners have the flexibility to choose investments and determine how the money in the account is used, and they'll enjoy the tax advantages of owning a 529 account.

Many grandparents and older investors use 529 accounts to transition wealth to their heirs, which allows them to reduce their own estate tax exposure while helping a child in their life pursue higher education. Plus, when someone other than the child owns a 529 plan account, it has no impact on the child's eligibility for federal student aid (although distributions from the account will need to be reported as the child's income).

There's no limit to the number of 529 plan accounts on which your child can be the beneficiary. The total amount you can invest in a 529 account for a single beneficiary generally ranges from $200,000 to over $300,000 per state, depending on the state.

Find out if your state offers a 529 plan tax deduction »

How Vanguard can help

There are a variety of 529 plans available to suit your needs. The Vanguard® 529 College Savings Plan is sponsored by the state of Nevada, but it's open to any investor. It offers three age-based investment options and 19 individual portfolios, as well as:

  • Simplified investing with an automatic savings plan.
  • Low costs and fees so you can keep more money for tuition and other education expenses.
  • Vanguard's experience as a leader with 29 direct-sold plans, and almost $55 billion in total managed assets.

Looking for other options? Many state-sponsored plans offer Vanguard investments and can be opened with as little as $25, such as the College Savings Iowa® 529 Plan.

Need to do a little homework first? Visit our 529 section to learn the basics and use our interactive planning tools to explore your options and determine your savings goals and costs. Or simply call a Vanguard education specialist at 866-734-4533. We'll help you learn the ABCs of 529s and get your children on track to meeting their college needs.

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

Notes:

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

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. 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. Vanguard Marketing Corporation serves as distributor and underwriter for some 529 plans.

For more information about The Vanguard 529 College Savings Plan, call 866-734-4533 or 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 and Underwriter.

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.

The Vanguard 529 College Savings Plan is a Nevada Trust administered by the Board of Trustees of the College Savings Plans of Nevada, chaired by the Nevada State Treasurer.

The Vanguard Group, Inc., serves as the Investment Manager and through its affiliate, Vanguard Marketing Corporation, markets and distributes the Plan. Ascensus Broker Dealer Services, Inc., 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.

Ugift is a registered service mark of Ascensus Broker Dealer Services, Inc.

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