Saving for College: How ‘Superfunding’ Could Supercharge Your College Fund

This post was updated in February 2025 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 $19,000 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 $13.99 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 $19,000 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 $95,000 per parent, for a total of $190,000 — 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 up to $190,000 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 2025 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 a 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.