Key takeaways

• The U.S. had 17.3 million 529 accounts worth $568 billion as of Q2 2025.

• Some states offer tax incentives, though residency isn’t always a requirement of a 529 account.

• Up to $35,000 in unused 529 funds can be rolled into a Roth IRA under Secure 2.0 if requirements are met.

Saving for college can bring a lot of questions, and it can be overwhelming to separate 529 myths from the facts. Created in 1996, a 529 account is an investment account with tax advantages (like tax-free potential growth) to fund educational expenses.¹

A quarter of people (26%) believe that investing in education or training is among the top ways to build wealth, according to Empower research.

As with all financial decisions, it’s important to dispel common misconceptions and have a full understanding of the details – here are some essential things to know about 529 savings accounts.

Myth #1: All 529 accounts must be opened where family lives or student will attend

529 accounts have seen steady growth: As of Q2 2025, Americans held 17.3 million 529 accounts, with a combined $568 billion in assets – compared to 16.8 million accounts and $508 billion in assets the year prior.²

Most states sponsor at least one 529 plan, though not many require the saver or beneficiary to be residents of that state.^3,4 Plan materials disclose any location-specific rules or regulations, so make sure to examine those carefully.

Some states may offer residents a tax break to use their local 529 plans through deductions for state income taxes. State deductions may have a dollar cap, be calculated as a percentage, or not be offered at all, as is the case in California, Hawaii, and Delaware.⁵

“In state or out of state?” may be an important question in the picking a college, though for 529 plans, the school’s location typically does not affect whether you can get those costs covered. The beneficiary of the 529 plan can attend school in a different state than where the 529 plan itself is held, unless the plan has a residency requirement.⁶

It’s helpful to consider the potential tax cuts available when deciding which 529 plan to open, as well as any additional fees.

Myth #2: People can only have one 529 account

Each 529 account has one beneficiary, usually the future student who will use the money for eligible educational expenses. However, there is no limit on the number of accounts assigned to the same beneficiary.⁷

For example, both a grandparent and a parent could set up separate accounts, naming the same grandchild as the beneficiary, or one account could be created and multiple people could contribute. The choice depends on how many accounts people want to maintain and whether they want to control how the funds are invested, or simply just want to contribute their portion. You could even set one up and name yourself as the beneficiary.⁸

Myth #3: I’ll lose money in a 529 if my child doesn’t go to college

Because 529 plans also allow for a change of beneficiary, the account can be “passed down” to another member of the family (like a younger sibling or someone attending grad school) if the original beneficiary’s educational plans change.

Thanks to Secure 2.0, funds in a 529 plan can also be repurposed for retirement savings with a maximum rollover of $35,000 into a Roth IRA, as long as the money meets specific criteria.

Myth #4: 529 plans are only for college students

Money from a 529 account can also be applied to students in elementary or high school (public, private or religious institutions), depending on the plan. In addition to typical school tuition and educational materials, qualified costs for younger students include services that can help them prepare for college, like:⁹

• Fees for standardized, advanced-placement, or college admissions testing

• Tutoring tuition

• Fees for dual enrollment at a college

• Educational and occupational therapies, including speech-language and behavioral

For these K-12 expenses, there is a withdrawal limit of $20,000 per year ($10,000 prior to Dec. 31, 2025).¹⁰

Read more: What can 529 funds be used for? Get a Sense Check

Myth #5: There are income limits to participate in a 529 plan

There are no income minimums or maximums on who can open a 529 plan, contribute to an account, or serve as the beneficiary.¹¹

Using a 529 plan for qualified costs can complement financial aid that a family may receive from a college or university. Grandparents, in particular, could have an upper hand with these accounts: 529s owned by a grandparent do not affect the Free Application for Federal Student Aid (FAFSA), while those owned by parents or the students themselves do have an impact.

Empower’s free college savings calculator lets people map out different saving scenarios and compare to the typical annual college cost.

Myth #6: All 529 plans have a minimum account contribution

There is no strict, federally mandated amount needed to get started with a 529 plan, though specific plans and providers may have a minimum amount to open an account and may assess fees depending on the account balances.12 Closely examine and understand a 529 plan’s rules before signing up.

While there is no lifetime maximum to how much people can contribute to a 529 account, keep in the annual gift tax exclusion of $19,000 per individual (and a lifetime amount of $15 million per person). These amounts represent how much you can give away to another person before gift tax applies.

Save for college with clarity

One way to reinforce savings and avoid extra overhead is to try automation: Regularly scheduled electronic deposits from a paycheck or checking account into a 529 can create a cycle on contributions and encourage better saving habits. With the amount being deposited into the 529 without any manual input, people can avoid being tempted to spend the money on other everyday expenses or splurges.¹³

It is also helpful to tap loved ones to help build education savings. 529 plans can offer gifting programs where family and friends can contribute to an existing account. Birthdays and other celebrations are an opportunity to accelerate contributions to a 529 plan: 45% of parents would ask for gifts to their children’s 529 account at holidays, with 19% asking for a 529 contribution instead of a physical present.¹⁴