529 Plan Calculator
Estimate your 529 college savings plan balance and how much of projected tuition costs it will cover.
529 Plan Calculator
Calculator
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Formula: FV = PV(1+r/12)^n + PMT×((1+r/12)^n - 1)/(r/12)
Worked example — ~$78K (41% of projected costs)
Formula
FV = PV(1+r/12)^n + PMT×((1+r/12)^n - 1)/(r/12)
529 plans grow tax-free for qualified education expenses. Returns compound monthly. College costs inflate ~5-6% annually.
Worked Examples
Example 1: Start at age 5
Problem:$5K balance, $300/mo, 6% return, 13 years
Solution:FV ≈ $78K. 4yr cost at 5% inflation ≈ $189K. 41% funded.
Result:~$78K (41% of projected costs)
Frequently Asked Questions
What are the tax benefits of a 529?
Earnings grow tax-free, and withdrawals for qualified education expenses are tax-free. Many states also offer state income tax deductions for contributions.
What counts as a qualified 529 expense?
Qualified expenses for tax-free withdrawals include tuition and fees, books and supplies, room and board (if enrolled at least half-time), computers and technology required by the school, and student loan repayment (up to $10,000 lifetime per beneficiary). As of 2024, 529 funds can also be rolled over to a Roth IRA for the beneficiary, subject to annual contribution limits and a 15-year account holding requirement.
What happens if my child doesn't go to college?
If the beneficiary does not attend college, you have several options: change the beneficiary to another family member (sibling, cousin, or even yourself), use the funds for K-12 tuition up to $10,000 per year, roll over up to $35,000 into a Roth IRA (new SECURE 2.0 option), use it for apprenticeship programs, or withdraw non-qualified funds and pay income tax plus a 10% penalty only on the earnings portion.
How does a 529 plan affect financial aid eligibility?
A 529 plan owned by a parent is reported on the FAFSA as a parental asset and is assessed at a maximum rate of 5.64% of the account value per year, which has a relatively minor impact on aid eligibility. Distributions from parent-owned 529 plans are not counted as student income on the FAFSA. Grandparent-owned 529 plans previously caused issues but new FAFSA rules starting 2024-2025 no longer count grandparent-owned 529 distributions as student income either.
How does monthly compounding work in the 529 future value formula?
The projection uses FV = PV(1+r/12)^n + PMT x ((1+r/12)^n - 1)/(r/12), where r is the annual return, n is the number of months, PV is your current balance and PMT is the monthly contribution. The first term compounds the existing balance; the second is the future value of an ordinary annuity, valuing every contribution for the months it stays invested. Because contributions made late earn very little compounding, starting early matters far more than contributing more later.
What is the difference between a 529 savings plan and a prepaid tuition plan?
A 529 savings plan is an investment account: you choose portfolios, the balance rises and falls with markets, and the money can be used at most accredited institutions nationwide. A prepaid tuition plan instead locks in credit hours at today's price, usually at in-state public schools, transferring tuition inflation risk to the plan sponsor. Savings plans offer flexibility and potentially higher growth; prepaid plans offer certainty but narrower use and, in some states, waiting lists or residency rules.
Why does the calculator inflate college costs separately from investment growth?
Savings and tuition grow at different rates, so applying one blended figure hides the gap. Your balance compounds at your portfolio return, while the target compounds at education inflation, historically around 5 to 6 percent and typically above general CPI inflation. The percentage funded is the ratio of the two projections. If tuition inflation exceeds your return, the funded percentage falls even as the balance rises, which is why the two rates are entered independently.
How should an age-based glide path change the return rate I enter?
Age-based or enrollment-date portfolios start equity-heavy and shift toward bonds and cash as the beneficiary nears college, so the expected return is not constant. A single rate is a simplification. If the child is young, a rate near your equity assumption is reasonable; within five years of enrollment, a lower blended rate better reflects the de-risked mix. A practical approach is to run the projection twice, once at your early-years rate and once at a conservative rate, and treat the pair as a range.
How do gift tax rules apply to 529 contributions?
Contributions are treated as completed gifts to the beneficiary, so they count against the annual gift tax exclusion for that donor and recipient. Amounts within the exclusion require no gift tax return. 529 plans also permit a five-year election, sometimes called superfunding, in which a lump sum is spread evenly over five years of exclusions, though further gifts to the same beneficiary in those years may then be reportable. Exclusion amounts change over time, so confirm the current figure before front-loading.
When is a Coverdell ESA or UTMA account a better fit than a 529?
A Coverdell ESA allows a wider investment menu and covers K-12 expenses broadly, but has a low annual contribution cap, income limits for contributors and an age deadline for using the funds. A UTMA custodial account has no contribution cap and no restriction on how the money is spent, but the assets legally become the child's at the age of majority and are assessed far more heavily than parental assets in financial aid formulas. For education-specific saving with aid-friendly treatment, the 529 usually wins.
References
Reviewed for accuracy by Daniel Agrici, Founder & Lead Developer · Editorial policy
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