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College costs continue to rise, creating financial pressure for many families. Even an in-state public university averages $27,146 per year for tuition, fees and living expenses, according to a 2025 report from Education Data Initiative. That figure nearly doubles to $58,628 per year at private institutions. To prepare for these expenses, many families turn to 529 college savings plans, which offer tax advantages and long-term growth potential. Like any investment, your approach to a 529 plan should evolve as the beneficiary gets older.
Do you have questions about building a long-term financial plan? Speak with a financial advisor today.
What Is a 529 College Savings Account?
A 529 college savings account, sometimes just called a 529 plan, is a type of investment account. With it, you can pay for qualified expenses related to your or your beneficiary’s education. The account is also tax-friendly. You can withdraw your account earnings tax-free as long as you use them for qualified expenses. That includes costs such as books, tuition, class fees, and room and board.
If you use your 529 plan earnings for costs outside that, though, you may get hit with income tax as well as a 10% penalty fee. However, this fee can sometimes be waived, such as in the case of a death, a disability or if the student earned a tax-free scholarship.
The tax advantages are appealing, but 529 plans also have some other perks. For example, if the beneficiary chooses not to go to college, you can change the beneficiary or pass unused funds to another. However, that money will still be subject to the same usage rules.
Almost all states sponsor their own version of a 529 plan, with some including additional benefits like a tax credit. And you don’t have to stick to just your own state’s plan; you can also shop around.
529 Investment Strategies
These tax-advantaged college savings plans typically offer a selection of investment strategies so you can find one that best fits your goals, timeline and risk profile. Here are three common 529 investing strategies:
- Age-based asset allocation: An investment portfolio that adjusts its asset allocation according to the beneficiary’s age.
- Objective-based asset allocation: A portfolio that reflects your desired potential return and the amount of risk you’re wiling to take.
- Customized allocation: A portfolio, or a combination of portfolios, that vary in their strategy.
Almost every state offers its own 529 plan. Each one comes with its own rules about tax benefits, minimum contributions, fees and more. Here is New York’s age-based plan to give you an idea of how age-based investing options can work with a 529 account.
Examples of Age-Based Portfolios for a 529 Plan
| Age | U.S. Large/Multi-Cap Equity | U.S. Mid/Small Cap Equity | Global Equity | International Equity | Emerging Markets Equity | Core Fixed Income | High Yield | Emerging Markets Debt | Ultra-Short Fixed Income |
| 0-5 | 40.25% | 9.25% | 19% | 17.25% | 9.25% | 5% | 0% | 0% | 0% |
| 6-8 | 36% | 8% | 17% | 15.50% | 8.50% | 10% | 3% | 2% | 0% |
| 9-10 | 31.75% | 7% | 15% | 13.75% | 7.50% | 18.50% | 4% | 2.50% | 0% |
| 11-12 | 27.25% | 6% | 13% | 12.25% | 6.50% | 27% | 5% | 3% | 0% |
| 13 | 23% | 4.50% | 11% | 10.75% | 5.75% | 35.50% | 6% | 3.50% | 0% |
| 14 | 19.25% | 3.75% | 9% | 8.50% | 4.50% | 43.75% | 7.25% | 4% | 0% |
| 15-16 | 15% | 3% | 7% | 6.50% | 3.50% | 53.75% | 7.25% | 4% | 0% |
| 18+ | 8.50% | 1.75% | 4% | 3.75% | 2% | 39% | 7% | 4% | 30% |
The table above provides an example of an age-based portfolio. In this scenario, your asset allocation automatically adjusts over the course of the child’s life. It can be a good fit for portfolio owners who want modest returns without high risk.
Of course, that’s not the only way a 529 investment strategy can change at different ages. CollegeAccess 529 Plan, which is sponsored in South Dakota, offers the following age-based asset allocation:
| Age Range | U.S. Equity | International Equity | Global Equity | Commodity-Related Equity | Fixed Income | Short-Term Bonds |
| 0-8 | 29% | 21% | 19% | 6% | 15% | 0% |
| 9-10 | 24% | 26% | 30% | 5% | 25% | 0% |
| 11 | 18% | 14% | 28% | 5% | 35% | 0% |
| 12 | 15% | 10% | 25% | 4% | 38% | 8% |
| 13 | 10% | 7% | 24% | 3% | 40% | 16% |
| 14 | 6% | 4% | 22% | 2% | 40% | 26% |
| 15 | 0% | 0% | 22% | 2% | 46% | 30% |
| 16 | 0% | 0% | 12% | 2% | 47% | 39% |
| 17 and over | 0% | 0% | 7% | 2% | 46% | 45% |
What Is a Static 529 Savings Plan?
With a static 529 plan portfolio, there is a specific investing objective in mind. For example, you may want your portfolio to prioritize aggressive growth. As a result, the portfolio’s asset allocation is shaped toward that goal. The asset allocation remains unchanged throughout the plan’s duration. You can alter the division of investments; however, it must be done manually. Because of this, a static portfolio is better suited for investors with experience.
Static portfolios can include target risk portfolios and individual portfolios. The former targets a predetermined level of risk, whereas the latter mirrors an underlying investment such as a mutual fund.
For example, the CollegeAccess 529 Plan in South Dakota offers the following static portfolios:
| Type of Static Portfolio | U.S. Equity | International Equity | Global Equity | Commodity-Related | Fixed Income | Short-Term Bonds |
|---|---|---|---|---|---|---|
| Diversified Equity | 46% | 31% | 19% | 4% | 0% | 0% |
| Diversified Bond | 0% | 0% | 0% | 0% | 95% | 5% |
| Ultrashort Bond | 0% | 0% | 0% | 0% | 0% | 100% |
How to Compare 529 Plan Options
When choosing a 529 plan, consider your financial goals and risk tolerance. For example, one state’s age-based plan may have you invest a significant portion of funds into stocks while the beneficiary is in college. That might make sense for someone who wants higher returns in exchange for greater risk because they started saving later, but such a plan isn’t intended to work for everyone. Each plan can vary drastically, so it’s important to do your research and choose the one that works for you.
One way you can compare your 529 plan options is through SavingforCollege.com’s online tool. It helps families review individual plans based on factors like performance and fees. Vanguard also has a 529 plan comparison tool that allows you to compare up to three different plans at a time.
When selecting a 529 plan, consider the following factors:
- Tax benefits
- Investment strategy
- Fees (i.e., account maintenance, investment, management)
- Accessibility of information
- Direct-sold plans vs. advisor-sold plans
Is a 529 Investment Strategy Right for You?
A 529 college savings account can be an effective way to save for higher education, particularly due to its unique tax advantages. Earnings in the account grow tax-deferred, and withdrawals are completely tax-free when used for qualified educational expenses, making it more advantageous than a traditional brokerage account.
However, a 529 account isn’t without its drawbacks. Using funds for expenses that aren’t qualified education costs can result in penalties. Additionally, these plans typically come with administrative fees that vary depending on the provider. Investment options are also limited; as the account holder, you’ll need to choose among the specific investment offerings of your chosen 529 plan.
To better understand whether a 529 plan fits your financial goals, consider estimating your expected college costs and potential financial aid. Important factors include available federal assistance, the age of you and your child, anticipated educational expenses and inflation rates. Having a clearer picture of your projected costs can help you determine if a 529 plan is right for you and establish a meaningful savings target.
Bottom Line
529 plans are a popular choice among families looking to save for college due to their flexibility and tax benefits. However, each family’s educational journey and associated costs can vary significantly. This means you may require a tailored savings strategy to best meet your future student’s needs. If you’re unsure how to start saving or need to adjust your existing approach, it could be beneficial to speak with a financial advisor.
Tips for Managing a 529 plan
- The best 529 plan for you will depend on various factors like your finances, the beneficiary’s age and more. If you need help sorting through your options, consider consulting a financial advisor. Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area. You can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- You don’t have to limit yourself. You can invest in more than one type of plan – even ones out of state. If you want to see your options, check out our review of the 529 plans across the U.S. It can give you some insight into their benefits and features.
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