The 529 Plan broad strokes

The Basics

For those who don’t already know, the 529 plan as it’s called is a way of saving pre-tax income for qualifying college related expenses, without penalty or tax and it’s probably one of the best ways to save for anything as improper withdrawals are only subject to normal taxes +10%.

All you really need to do is choose which plan and start socking it away asap to take advantage of compound interest, IE the greatest force in the Universe – Albert Einstein-ish

For that you can look high and low, far and wide and still come up scratching your head so let me save you a little leg work – I choose to go with Vanguard, while keeping an eye on Wealthfront and here’s why.

Wealthfront has tons of cool things it does for you but it’s a tech company and if Amazon is any indication they don’t tend to play by “the rules”. The usual goal is adoption and share price, so Imma chillax on that one until after the next bump in the road.

One thing they do offer at a much cheaper entry point is Vanguards Total Index fund for their 529 plans, which cuts the cost of joining from 1000 to 500 for Nevada residents where the plan is sponsored or from 3000 to 500 everywhere else and they re-balance it with other investment vehicles to keep the gains bro!

Luckily I am a Nevada resident for some time, so it only cost me 1000 to get started. I would happily pony up the 3000 as it’s more to compound interest on.

Getting Started

Before doing anything, you should speak to your accountant/tax professional or Lawyer if handling funds through a family or other trust. Finally if choosing Vanguard, their customer service professionals to find out whats right for you. Age based or fixed portfolios and more.

Next decide where you live and how much you can manage each month and stick with that, as I mentioned before you can start with as little as 1000 to 3000 depending on your residency but do as much as your sensibly can and budget a sensible amount each month unless you can lump sum.


While you can start with the minimum, you can also start with the maximum. Which in this case is called front loading. This means to put the maximum in to the plan in the first year as possible, which in this case means 5 years in advance with no tax penalty.

Normally you would be allowed to do 14,000 to 28,000 a year depending on filing single or jointly but you can front load in the first year as much as 70,000 or 140,000 instead depending on your filing.

Depending on your child’s age and market performance, minus fees this could easily mean that your 1 time investment could completely pay for college without additional investment solely based on compounding interest.

You can still contribute at any time during those 5 years with a small tax penalty or have anyone else, like grandparents pay into it as well with the available electronic payment options they offer.

It should be noted that while US residents can manage as many 529 funds as they want and name any beneficiary, that beneficiary must have a social security number upon dispersion, something to consider if your foreign born nephew wants to go to Harvard Medical School and any funds must be drawn from a US based account. I am told they would apply for a social security number upon arrival, but speak to your professional first,

While some international banks do partner with US banks to facilitate US drawn accounts, I highly suggest speaking with your banking expert before doing anything else.


The 529 plan administrator can name, change the beneficiary of the 529 plan as many times as they want, even spending the money on themselves for any qualifying college related expense. They can also have as mentioned earlier as many plans and beneficiaries as they want, up to around 400,000 in each plan.

That means, books, food, transportation and lodging if required and many more.

Could it mean buying an investment property off campus and charging yourself rent? possibly, though again first speaking to your tax professional before you decide to do so as laws change everyday.

Bonus: you can withdraw an amount equal to any scholarship amount your beneficiary receives, tax free, so tiger parent the hell out of them and buy yourself that Ferrari! lol j/k not really.



Well your money could be tied up in a depreciating vehicle if you cash out during a downward trend, but if you start early enough your still going to be way up.

Also if you do not use the money for college you will have to pay taxes +10%…so move to a state with no state tax first +12% and realize that after the second year you are likely up more than that on average and after 18 years your money has grown by leaps and bounds even with that.

Editors Note

Vanguard has one of the lowest cost of plan management fees anywhere legitimate with a long track record and solid foundation, aout 1/2 a percent where some fees can get up to as much as 5% with hidden fees and charges so watch out.

Also, though it’s not a recommendation for anyone else I decided to utilize the Total Index Fund for my 529, which is one of the highest performing and longest run options they have, it’s also an ETF I purchase for my own retirement.

To see all the options for self managing visit here


There is no reason not to start a 529 plan today and take advantage of compound interest, it’s free money. So do your research, talk to your people and start saving for the future today because inflation is going to kill your purchasing power over time anyway, and the almighty only knows how crazy tuition will be when every millionaire on the planet is sending there kids here for school… might as well learn to beat it now.

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