Vanguard 529 College Savings Plan Review

Vanguard 529 Plan

The Vanguard 529 Plan, managed by Ascensus and sponsored by the state of Nevada, touts low costs, expert management, stability, a top industry rating and great customer service for college savers.

The Vanguard 529 Plan earned a “gold” rating from Morningstar and was one of only three to be awarded that designation. (For comparison, the Utah Educational Savings Plan and Virginia529 inVEST were the other two gold-rated plans.)

Morningstar uses five key pillars to determine its top-rated 529 plans—process, people, parent, price and performance; other benefits are also considered, including local tax breaks.

Individual state options

The following states participate in The Vanguard 529 College Savings Plan sponsored by Nevada:

  • Alabama
  • Arkansas
  • Hawaii
  • Idaho
  • Illinois
  • Indiana
  • Kansas
  • Louisiana
  • Montana
  • Nebraska
  • Nevada
  • New Mexico
  • North Carolina
  • North Dakota
  • Ohio
  • Oregon
  • Pennsylvania
  • Rhode Island
  • South Carolina
  • Tennessee
  • Texas
  • Utah
  • Virginia
  • West Virginia

Age-based options

There are three age-based options for investors. Ultimately, the choice between the three boils down to individuals’ risk comfort level. The three options are:

  • Conservative age-based option
  • Moderate age-based option
  • Aggressive age-based option

For each age-based option, Vanguard’s investors automatically assume less risk as their children grow closer to college age.

Conservative age-based option

The conservative age-based option offers a 60 percent stock/40 percent bond portfolio for children aged 0-2 years. For an 18-year-old child, the conservative approach would reflect assets that total a 25 percent bond/75 percent short-term reserves portfolio.

Moderate age-based option

The moderate age-based option offers children aged 0-2 years an asset allocation of 90 percent stocks/10 percent bonds. Conversely, an 18-year-old child would automatically be invested in a 75 percent bond/25 percent short-term reserves portfolio (it’s the exact opposite of the conservative portfolio for 18-year-olds).

Aggressive age-based option

Finally, the aggressive age-based option offers a 100 percent stock portfolio for children aged 0-2 years. For 18-year-olds, the aggressive approach includes a 10 percent stock/90 percent bond portfolio.

Vanguard 529 (static) portfolios

Investors can also choose to manage their own investments by selecting between 19 different individual portfolios. If individuals choose to invest in this way, careful rebalancing is needed as their child’s college years draw nearer. The individual portfolio asset class options include:

  • Money market portfolios
  • Bond portfolios
  • Balanced portfolios
  • Stock portfolios
  • International portfolios

Vanguard 529 Account review

Expense ratios

Expense ratios are the same for the three age-based options, all 0.17 percent—a really low percentage compared to the industry average.

For individual portfolios, the expense ratio depends on what asset allocation you choose—expense ratios range anywhere from 0.17 to 0.45 percent.

No enrollment fees, transfer fees or commissions are charged. However, there is a $20 annual maintenance fee for account balances less than $3,000.

Initial investment amount

A minimum initial investment of $3,000 is required for the Vanguard 529 plan; for Nevada residents, the minimum is $1,000. The minimum additional investment amount is $50 and the total contribution limit is $370,000.


Returns are the highest across the board for the young child age-based portfolios. Five-year returns for moderate, conservative and aggressive portfolios for ages 0-6 were 8.3 percent, 6.3 percent and 10.3 percent, respectively. On the other end of the spectrum, returns for moderate, conservative and aggressive portfolios for ages 19+ were 1.2 percent, 0.3 percent and 1.2 percent, respectively.

For a list of returns, visit this link.

Tax deductions

One of the main benefits of investing in a 529 plan, most states allow investors to deduct 529 contributions on state income tax returns. (Each state has a different limit.)

Vanguard’s website features an interactive 529 state tax deduction calculator, in which investors can estimate a planned contribution amount, type in state of residence, filing status (married/joint or single) and taxable income and calculate the results for potential state tax savings.

Vanguard 529 Plan review

Other 529 plans Vanguard manages

Investors can click on “See how the Vanguard 529 stacks up” interactive map to see if their individual state offers a tax break and/or Vanguard investments. The following states offer Vanguard investments, management and services, in which Vanguard provides investment management and phone support from trained 529 plan representatives:

- Colorado (CollegeInvest Direct Portfolio Savings Plan)
- Iowa (College Savings Iowa 529 Plan)
- Missouri (MOST—Missouri’s 529 College Savings Plan)
- New York (New York’s 529 College Savings Direct Plan)

Ugift and Upromise

Another way to save for college, college savers can use Ugift to invite others via email to contribute to a child’s account. These gifts are automatically deducted from a grandparent’s or other friend or relative’s checking account and deposited directly into a 529 plan account.

In addition, 529 plan participants can also take advantage of Upromise Rewards, a free loyalty program. College savers earn cash back for college by shopping online, going out to eat, buying groceries and booking vacations. Cash is directly deposited into participants’ 529 plan.

Vanguard 529 review


Vanguard breaks its website into five helpful areas:

  • Learn about 529 plans
  • Compare 529 plans
  • Why The Vanguard 529 Plan?
  • Choose investments for your 529 account
  • Open your Vanguard 529 account


- Overall, the Vanguard 529 Plan is an excellent choice for college savers.

- The Vanguard plan charges low expense ratios, especially for age-based investment options.


- Vanguard’s 529 plan requires a $3,000 minimum for non-Nevada natives (Nevadans’ minimum is $1,000), a steep figure which could discourage some investors. Other 529 plans (such as the Utah Educational Savings Plan) do not require a minimum initial contribution.

- The annual $20 maintenance fee for account balances less than $3,000 is unfortunate. Other 529 plans may not require a minimum amount to be contributed or maintained (see the Utah Educational Savings Plan.)

Vanguard 529 Plan Review Summary

Overall, the 529 Plan makes sense chronologically, especially for new investors. Highly appropriate questions are answered at every stage in the process, including questions about tax benefits, beneficiary designations, rollovers, contribution limits, the 529 impact on college financial aid, etc.

In addition, it’s easy to open an account and to get started. There are just a few steps, which Vanguard clearly details on its website:


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