Anyone can open a 529 college savings plan

Anyone can open a 529 college savings plan
Key takeaways
Anyone can open one

You don’t have to be the parent— or even a relative — to open a 529 plan and save for a child’s education.

Talk with the parents

It’s a good idea to let the child’s parents know you’re opening one and coordinate with them when it’s time to use the money.

Choose a plan and investments

Research available plans, their tax benefits, and investment choices to make an informed choice.

You don’t need to be a parent or other relative to save for and contribute to a child’s education. Anyone can open a 529 college savings plan for a child. The child isn’t the only one who can benefit. The 529 plan owner may get a state tax deduction and reduce their taxable estate — and feel good about helping to educate a child! Here’s what to keep in mind before opening a 529 plan.

Talk with the parents

It’s important to talk with the child's parents. You’ll need the child’s Social Security number to open the 529 plan. Discuss financial aid implications, although starting with the 2023-2024 school year, withdrawals from non-parent-owned 529 plans will no longer be considered student income.

When it’s time to use the money, you’ll need to discuss withdrawals and coordinate who’ll pay which expenses. Money from a 529 plan can be used for college-related expenses, as well as K-12 private school tuition. It’s critical to not withdraw money that won’t be used for qualified expenses, or you’ll have to pay taxes and a penalty on the earnings portion.

Understand the tax benefits

Contributing to a 529 plan may help you reduce your state income taxes. Thirty-four states and the District of Columbia currently offer a state income tax deduction or tax credit. (Contributions to 529 plans are not federally tax deductible.) In most states that offer tax benefits, anyone who contributes to a 529 plan can get a state income tax deduction. In 10 states, however, only the plan account owner can claim a tax benefit. Get 529 tax benefits by state.

Research 529 plans

There are many 529 plans to choose from. They’re state-sponsored and they’re all different. You aren’t required to choose the 529 plan from the state where the child resides. Here are three things to consider:

Tax benefits: In some states, the account owner only gets the tax deduction for contributions to the state’s plan. Some states give the account owner a deduction no matter which state plan they contribute to. Should you always base a decision on tax breaks? In general, if a child is young, lower fees are more important. That gives more of the investments the opportunity to grow without being reduced by fees. If the child is older, a tax break may be more advantageous. A financial professional can help you determine what makes sense for your situation.

Fees: Compare fees for management and administration, investments, account maintenance, and transactions. They’ll vary by plan. As noted above, lower fees give more of your investment the opportunity to grow.

Investments: Each 529 plan typically offers several investment choices with varying levels of risk. If you want a particular investment and your state plan doesn’t offer it, another state may. For instance, you may want guaranteed, principal-protected, or FDIC-insured bank options. You may also prefer a particular fund manager. You aren’t locked into the investment you choose when you first open an account, although IRS regulations only allow exchanges from one investment option to a different one twice in a calendar year.

If you’re less comfortable with risk and more of a set-it-and-forget-it investor, an age-based portfolio, which automatically becomes more conservative as the child approaches high school graduation, can be a good choice. If you want to be aggressive (and you understand the risks), a static portfolio might be right for you. You choose your risk level. When choosing this approach, remember that being too conservative for too long may be risky. You may miss out on growth potential and the ability to save enough for the rapidly rising cost of college. There are two types of static portfolios:

Target risk, which has a set risk profile such as conservative, moderate, growth, or aggressive. The portfolio manager adjusts the asset mix of the portfolio periodically to stay within its risk profile.

Individual, which allows an ultimate do-it-yourself investor to build their own portfolio of stocks, bonds, and alternatives.

Learn about the investment portfolio options with Invesco’s CollegeBound529 portfolio options.

When and how much to contribute

There’s flexibility when contributing to a 529 plan, so you can choose what works best for you.

Accelerated gifting: A special provision allows a person to make five years of contributions (the current year plus four future years) in a single year.1 In 2023, the annual gift amount is $17,000, so a person can contribute $85,000 and a married couple $170,000 to a 529 plan. You can gift to as many people as you want in a year, so you can superfund a 529 college savings plan for as many children as you want.

Automatic contributions: (also called recurring contributions) You can set up regular contributions from a bank or investment account on a schedule you want — weekly, monthly, quarterly, or semi-annually, for example.

Payroll contributions: Some companies allow contributions directly from your paycheck to your 529 plan. Check with your HR representative. 

Talk with a financial professional

Whether determining which 529 plan and investment option best meets your needs, how much and how to contribute to one, a financial professional can help.  

Learn more about saving for college.


  • 1

    The gift-tax exclusion applies, provided the 529 account owner makes no other gifts to the beneficiary during a five-year period. Contributions between $17,000 and $85,000 ($34,000 and $170,000 for married couples filing jointly) made in one year may be prorated over a five-year period without subjecting the donor(s) to federal gift tax or reducing his/her federal unified estate and gift tax credit. If an individual contributes less than the $85,000 maximum ($170,000 for married couples filing jointly), additional contributions may be made without subjecting the donor to federal gift tax up to a prorated level of $17,000 ($34,000 for married couples filing jointly) per year. Gift taxation may result if a contribution exceeds the available annual gift tax exclusion amount remaining for a given beneficiary in the year of contribution. If the account owner dies before the end of the five-year period, a prorated portion of contributions between $17,000 and $85,000 ($34,000 and $170,000 for married couples filing jointly) made in one year may be included in his or her estate for estate tax purposes. Please consult your tax and/or legal advisor for further guidance.

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