Happy Birthday, 529 Education Savings Plans! Incentivizing families to save for continuing education was a brilliant idea back in 1996 and continues to be a great way to help save for future education needs.
Congress formally established 529 Education Savings Plans as part of the Small Business Job Protection Act of 1996. These tax-advantaged vehicles let families set aside funds for qualified education expenses, such as tuition, fees, books, required supplies, equipment and even room and board. 529 Plans benefit from tax-free compounding, so investment earnings can be reinvested without the proverbial “tax-drag” from capital gains or other taxes. Over time, this can add up and help families tackle rising education expenses and much more.
Maturing with Age
While 529 Plans are celebrating an important milestone, they have evolved significantly since 1996, becoming more flexible over the years. Signed into law in late 2022, the SECURE 2.0 Act was intended to help Americans with their personal finance and retirement savings goals. Among other provisions, this legislation provides beneficiaries of a 529 Plan the ability to roll over up to $35,000 into a Roth IRA to help ensure that participants do not lose those funds, even if the beneficiary’s educational plans change. 1
More recently, in 2025, Congress passed a new budget, also known as the “One Big Beautiful Bill Act" (OBBBA), that had sweeping implications for various federal agencies and programs. As a result, 529 Plans have become more flexible for investors.
Today, 529 Plans can provide assistance far beyond college years and often well before them. For example, recent changes now allow these savings vehicles to be used for students in kindergarten through 12th grade (up to $20,000 annually).
When it comes to post-secondary education, the recent changes in legislation now allow 529 Plans to cover an increasing number of credentialing programs and vocational training, provided these programs meet certain criteria, such as being recognized under Workforce Innovation and Opportunity Act (WIOA) or the Department of Veteran Affairs WEAMS database.
Flexible and Transferable
Today, 529 Plans boast the flexibility to help families meet several situations. For example, there are provisions that allow investors to transfer funds without a tax penalty to a new 529 Plan for the same beneficiary (i.e., a rollover) or to a new beneficiary who is a family member. Thus, if one child or grandchild chooses not to go to school, those funds can be used for another family member. Funds can also be transferred from 529 Plans to ABLEnow accounts, which are tax-advantaged vehicles created to assist people with disabilities. As always, such transfers or rollovers are subject to specific regulations, so be sure you know the rules or check with your tax or legal advisor2.
After 30 years, 529 Plans remain one of the most effective tools available for education savings. These savvy and tax-smart savings vehicles may be all grown up, but they are poised to provide a wide array of potential benefits to help defray the cost of education for many years ahead.
Learn more about the Victory Capital 529 Education Savings Plan and start saving for the future today.
1529 plan accounts must be at least 15 years old to roll over into a Roth IRA.
2 Victory Capital does not provide tax or legal advice.
