What is a 529 plan?

A 529 plan is one of the most popular ways to save for college, or it can be used for elementary or high school tuition, too.1 Just about every state sponsors a plan, so no matter where you live in the U.S. (and as long as you're a citizen) you can save in any state's plan. Even better all contributions grow tax-deferred, and the earnings can be withdrawn tax-free, as long as it's for qualified expenses such as tuition, books, supplies, and other costs. Our advisors can help you navigate the requirements, benefits, and tax implications, so you can make the right choices for your family.

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Save $100k

If you place $250 a month in a 529 plan for your newborn, by the time they're 18 you'll have socked away quite a lot.2

The benefits of 529 plans

Tax advantaged

All the money you put in will grow tax-deferred, and withdraws are free from federal income tax, as long as the money is used for qualified education expenses.

Less impact on financial aid

When calculating financial aid, 529s are considered a parent's asset so it's weighted less than if it was the student's asset. So your child could qualify for more aid like scholarships, grants, and loans, if needed.

More flexibility

There are no income or age restrictions, so just about anyone can open and fund an account—parents, grandparents, other relatives, even family friends.

Greater control

The account owner makes sure the money goes toward qualified costs and can transfer unused funds to another beneficiary (e.g., a family member of the original beneficiary).

What's the difference between 529s and other college savings plans?

A key part of any education savings strategy should be the use of tax-advantaged savings accounts. The right option for you will depend on your income and family's needs.

529 savings account

You can use the money for college, elementary or high school, and earnings will grow federal income tax deferred, and withdrawals taken to pay for qualified expenses are also free from federal income taxes.

Coverdell savings account

Help cover the costs of kindergarten through 12th grade, or college. Like 529s, they grow tax deferred, however, there's a $2,000 yearly contribution limit and those with higher incomes might not be eligible.

Uniform gifts & transfers account

Known as UGMA/UTMAs, they let parents (and others) gift money to children. Earnings are taxed at the minor's tax rate, and unlike a 529 or Coverdell account, the money can be used for college or anything else.

Who can contribute to a 529 plan?

Anyone who lives in the United States and is aged 18 and over can open an account and put in money—parents, grandparents, aunts, uncles, cousins, even friends. So instead of giving a traditional gift on holidays, birthdays, or special occasions, you can encourage friends and family to contribute to your child's education. Starting early is key. Even if you feel like most of your disposable income goes to disposable diapers, the more you sock away, the more your savings will have a chance to grow.

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How 529s fit in with your financial plan

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At Northwestern Mutual, a 529 is just one part of an overall financial plan. Through your financial advisor, you'll have access to other financial options to help you reach all of your goals, including investments for growth, insurance for protection, and annuities for more flexibility in retirement. Each is designed to reinforce the other so your personalized plan can work its hardest for you. Here's what our version of financial planning can do for you:

  • Help grow your money with investments for today and in retirement

  • Make the most of what you have with recommendations for saving and paying down debt

  • Protect everything you've worked so hard for

Our approach to planning

The Northwestern Mutual difference

Top 10 ranked investment service

We're one of the top U.S. Independent Investment Broker-Dealers.3

Ranking for Northwestern Mutual Investment Services LLC, Financial Advisor magazine and InvestmentNews, April 2021

4.9M+ clients at Northwestern Mutual

The number of people we're proud to call clients, and who put their trust in us.

164+ years strong through depressions, downturns, pandemics, and two world wars

The number of years we've been there for our clients—through depressions, downturns, pandemics, and two world wars.

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Ready to set up a 529 plan?

Our financial advisors will help you create a college savings plan, including a 529 so your children can go to the school (or schools) they want.

It's easy to get started—no commitment, just a conversation.