529 College Savings Calculator
Estimate future education costs and savings growth
Projected 529 Savings at Start:
Projected Total College Cost:
Funding Gap/Surplus:
Estimated Monthly Shortfall:
How to Use the 529 College Savings Calculator
A 529 plan is a tax-advantaged savings account designed to encourage saving for future education costs. This calculator helps you understand if your current savings trajectory matches the rising costs of higher education. By inputting your current balance and monthly contributions, you can visualize the power of compound interest against the reality of tuition inflation.
Understanding the Variables
- Current Balance: What you have saved specifically for education today.
- Years Until College: The time horizon for your investments to grow before withdrawals begin.
- Expected Annual Return: The average yearly growth of your 529 investments (typically 5-7% for balanced portfolios).
- Education Inflation: Historically, college costs rise faster than general inflation, often between 4% and 6% annually.
Example Calculation:
If you have a 5-year-old child (13 years until college) and start with $10,000, contributing $500/month at a 6% return, you would have approximately $128,450 by age 18. If the current cost of a 4-year degree is $100,000 and inflation is 5%, that degree will actually cost roughly $218,000 when they enroll, leaving a gap to be filled.
If you have a 5-year-old child (13 years until college) and start with $10,000, contributing $500/month at a 6% return, you would have approximately $128,450 by age 18. If the current cost of a 4-year degree is $100,000 and inflation is 5%, that degree will actually cost roughly $218,000 when they enroll, leaving a gap to be filled.
Key Benefits of a 529 Plan
The primary advantage of a 529 plan is its tax treatment. While contributions are not deductible on federal taxes, the investment grows tax-deferred, and withdrawals are tax-free when used for qualified education expenses like tuition, fees, books, and room and board.
Qualified Expenses Include:
- Undergraduate and Graduate tuition.
- Vocational and trade school fees.
- K-12 tuition (up to $10,000 per year).
- Apprenticeship programs and student loan repayments (up to lifetime limits).
Strategies to Bridge the Funding Gap
If your results show a shortfall, consider these adjustments:
- Increase Monthly Deposits: Even an extra $50 a month can compound significantly over a decade.
- Lump Sum Contributions: Use tax refunds or bonuses to boost the principal early.
- Adjust Expectations: Consider two years at a community college followed by a transfer to a four-year university.
- Grandparent Contributions: 529 plans allow others to contribute to the same beneficiary, which can also provide estate tax benefits for the donor.