529 Plan Calculator
A 529 is a state-sponsored education savings account. Growth and qualified withdrawals are federally tax-free, and many states add a deduction or credit for contributions — which makes the choice of plan a tax question as much as an investment one.
Time Horizon Is Short and Fixed
Unlike retirement, the deadline does not move. A newborn gives eighteen years; a twelve-year-old gives six. That difference changes the appropriate risk entirely, which is why almost every 529 offers age-based portfolios that shift from equities toward bonds automatically as enrolment approaches.
| Child's age | Years remaining | Typical equity allocation |
|---|---|---|
| 0–5 | 13–18 | 80–90% |
| 6–10 | 8–12 | 60–75% |
| 11–14 | 4–7 | 40–55% |
| 15–18 | 0–3 | 20–30% |
Your Own State's Plan May Not Be Best
You may invest in any state's plan regardless of residence, and attend school in any state regardless of plan. What is state-specific is the tax break: some states offer a deduction only for their own plan, some offer it for any plan, and some offer none at all.
Where your state gives no deduction, choose on fees and fund quality alone.
What Counts as Qualified
Tuition, fees, books, required equipment, and room and board for at least half-time students. Also, within limits: K–12 tuition, apprenticeship costs, and student loan repayment.
Non-qualified withdrawals owe income tax and a penalty on the earnings portion only — your contributions come back untouched, which makes the downside smaller than people fear.
Leftover Money Is No Longer Stranded
The old objection — "what if they don't go?" — has weakened considerably. A 529 can be transferred to another beneficiary, including siblings, cousins or yourself. Recent rules also allow rolling unused funds into the beneficiary's Roth IRA, subject to a lifetime cap and account-age conditions.
Effect on Financial Aid
A 529 owned by a parent is assessed at a much lower rate than one owned by the student, so ownership matters. Grandparent-owned accounts were historically penalised for distributions; recent FAFSA simplification removed that treatment.
The Projection Behind This Page
Starting from $10,000, adding $200 a month at 7%:
| Year | Deposited | Balance | Growth | Growth on deposits |
|---|---|---|---|---|
| 1 | $12,400 | $13,201 | $801 | 6% |
| 5 | $22,000 | $28,495 | $6,495 | 30% |
| 10 | $34,000 | $54,714 | $20,714 | 61% |
| 20 | $58,000 | $144,573 | $86,573 | 149% |
The Formula
``
A = P(1 + r/n)^(nt) + PMT × [((1 + r/n)^(nt) − 1) ÷ (r/n)]
└── initial principal ──┘ └────── regular contributions ──────┘
``
The second term usually dominates. On these numbers the $200 monthly contribution accounts for the larger share of the final balance, which is the practical lesson: how much you add matters more than the rate, right up until the balance gets large.