You can fund a 529 account with up to five years of contributions at once. This feature, called superfunding, is a powerful tool in preparing for your child’s college expenses.

This post was updated in February 2024 to reflect current contribution limits.

Even if your kid is still in diapers, it’s never too early to start thinking about whether and how you’ll pay for their college education.

When it comes to saving, 529 plans are the most popular investment vehicle. In more than 30 states, you can deduct at least part of your contributions from your state taxes, and no matter where you live, earnings are tax-free. Withdrawals will be, too, as long as your child uses the money for qualified higher education expenses at any eligible institution. You can also use 529 withdrawals for vocational school, trade school, or K-12 education up to $10,000 per year.

529 plans are also popular because they don’t have annual contribution limits. There are only two “limits”: Each state has an aggregate contribution limit (these differ from state to state), and if you contribute more than $18,000 in a year, you’ll have to report it as a gift on your taxes. It will then count toward your lifetime gift tax exclusion limit (which you likely won’t have to worry about unless you plan to give away more than $13.61 million in your lifetime). If you have questions about this, it’s wise to consult a tax professional about your specific situation.

There is, however, an exception to the $18,000 rule and it could serve as a powerful tool in preparing for your child’s college expenses.

It’s a bird, it’s a plane… it’s superfunding

Unlike retirement savings, which have decades to compound and grow, you’ve usually only got around 18 years before you’ll need to pay for the beneficiary’s education.

To help compensate for this, the IRS offers a workaround: You can fund a 529 with up to five years of contributions at once — up to $90,000 per parent, for a total of $180,000 — without it counting toward your lifetime gift tax exclusion limit. This feature, called superfunding, dramatically increases how much money you can use to jumpstart a 529 by using the power of compounding to your advantage.

Obviously, that’s a ton of money to allocate to a savings plan but if it’s financially possible for you, the benefits can be pretty incredible. (That’s why we designed the Wealthfront 529 with superfunding as a standard option.) Research from Vanguard suggests that if you’re deciding between investing a lump sum today or dollar cost averaging it into the market (where you invest a portion of the total sum on a regular schedule), lump-sum investing tends to yield a higher ending balance on average.

Superfunding could also make your future self behave

When saving to send a child to college, you might want to consider taking advantage of “commitment devices” that lock you into a good course of action today and prevent you from making poor choices tomorrow.

If you can afford it, superfunding can act as a commitment device. That’s because it requires making one large deposit, and thereby avoiding the decision fatigue and potential disillusionment you might face with an 18-year saving program. (Especially important during those teenage years, when your kids are giving you attitude for days!)

More (super) food for thought

Before superfunding a 529 plan, here are a few more things you should consider:

  • Liquidity: Can you really afford to take $180,000 and lock it away in a tax-deferred account for 18 years? You’ll face stiff penalties if you withdraw money for non-college expenses.
  • Commitment: How confident are you that the money will be used for your child’s education? What happens if they win a full-ride scholarship or decide to take a different path? Though 529 plans allow you to switch beneficiaries to relatives like siblings or cousins, it’s a question worth considering.
  • Plan selection: Some 529 plans have few fund choices and high fees. So, if you’re going to superfund, make sure it’s into a low-cost plan with high-quality investments.

It’s worth noting that thanks to the SECURE 2.0 Act, which went into effect in 2024, it’s now possible to roll over up to $35,000 of unused funds from a 529 plan to a Roth IRA in the beneficiary’s name. The 529 plan must have been established for the beneficiary at least 15 years before the rollover, and earnings and contributions from the last five years aren’t eligible.  The rollover amount for any given year is limited to the annual contribution limit for Roth IRAs, which is $7,000 in 2024 or $8,000 for those 50 and older.

Use windfalls to superfund

Windfalls are large, one-time financial gains; they could occur when your employer goes public, for example, or when an elderly relative leaves you an inheritance.

If you’ve received a windfall, superfunding a 529 plan might be a good way to use it. Not only will it create a healthy college fund for your child, it could bring you peace of mind as well.

Here’s what we mean: How would it feel to know you’ve made a significant contribution to your child’s future education without the need for ongoing savings and maintenance? Probably pretty good.

That’s why, if you have the resources, superfunding a 529 is a smart strategy for reaching your college savings goals.

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For more information about the Wealthfront 529 College Savings Plan (the “Plan”), download the Plan Description and Participation Agreement (to be made available on Plan launch) or request one by calling or emailing or (650) 249-4250. Investment objectives, risks, charges, expenses, and other important information are included in the Plan Description and Participation Agreement; read and consider it carefully before investing. Wealthfront Brokerage Corporation serves as the distributor and the underwriter of the Plan.

Please Note: Before investing in any 529 plan, you should consider whether you or the beneficiary’s home state offers a 529 plan that provides its taxpayers with favorable state tax and other benefits that are only available through investment in the home state’s 529 plan. You also should consult your financial, tax, or other advisor to learn more about how state-based benefits (or any limitations) would apply to your specific circumstances. You also may wish to contact directly your home state’s 529 plan(s), or any other 529 plan, to learn more about those plans’ features, benefits and limitations. Keep in mind that state-based benefits should be one of many appropriately weighted factors to be considered when making an investment decision.

The Wealthfront 529 College Savings Plan (Plan) is administered by the Board of Trustees of the College Savings Plans of Nevada (Board).

Earnings on nonqualified withdrawals are subject to federal income tax and may be subject to a 10 percent federal tax penalty, as well as state and local income taxes. The availability of tax and other benefits may be contingent on meeting other requirements.

The information contained is provided for general informational purposes and should not be construed as investment advice. Nothing should be construed as tax advice, solicitation or offer, or recommendation, to buy or sell any security. Financial advisory services are only provided to investors who become Wealthfront clients. Wealthfront does not represent in any manner that the tax consequences described here will be obtained or will result in any particular tax consequence.

Prospective investors should confer with their personal tax advisors regarding the tax consequences of investing with Wealthfront, based on their particular circumstances.

About the author(s)

The Wealthfront Team believes everyone deserves access to sophisticated financial advice. The team includes Certified Financial Planners (CFPs), Chartered Financial Analysts (CFAs), a Certified Public Accountant (CPA), and individuals with Series 7 and Series 66 registrations from FINRA. Collectively, the Wealthfront Team has decades of experience helping people build secure and rewarding financial lives. View all posts by The Wealthfront Team