529 Plan

investment

Also known as: 529, 529 college savings plan

Updated · Written and reviewed by Konstantin Iakovlev

Detailed explanation

Two types: 529 Savings Plans (most common, market-investment-based) and 529 Prepaid Tuition Plans (lock in current tuition, fewer states offer). Federal annual contribution limit is the gift-tax exclusion ($19,000/year per donor in 2026), or 5-year averaging up to $95,000 per beneficiary. Total lifetime limits vary by state ($235K-$575K). SECURE 2.0 (effective 2024) lets unused 529 funds (held 15+ years) roll to a Roth IRA for the beneficiary, capped at $35,000 lifetime, subject to annual Roth contribution limits. State tax deductions vary widely: CO/IN/SC/NM allow full deductions (no cap), NJ/HI/CA/DE/KY/ME/NC have NO deduction.

Use these calculators to apply this concept

Related investment terms

Compound Interest

Compound interest is interest calculated on the initial principal AND the accumulated interest of previous periods. It p...

Dollar-Cost Averaging (DCA)

Dollar-cost averaging (DCA) is investing a fixed dollar amount at regular intervals (e.g., $500/month into an index fund...

Tax-Loss Harvesting

Tax-loss harvesting is the strategy of selling investments at a loss to offset capital gains (and up to $3,000/year of o...

Qualified Dividend

Qualified dividends are dividends from US corporations (and qualifying foreign corporations) that meet IRS holding-perio...

Net Investment Income Tax (NIIT)

NIIT is a 3.8% surtax on net investment income (interest, dividends, capital gains, rental income) for high earners. App...

← Back to glossary · Suggest an addition: [email protected]