529 Calculator

What Is a 529 College Savings Plan?

A 529 plan is a tax-advantaged investment account designed specifically for education expenses. Contributions grow tax-free, and withdrawals are tax-free when used for qualified education costs including tuition, room and board, books, supplies, and up to $10,000 per year for K-12 tuition. Every US state offers at least one 529 plan, and you can invest in any state plan regardless of where you live or where your child attends school.

How Much Should You Save?

The average annual cost of a four-year public university is approximately $23,000 including tuition, fees, room and board. Private universities average around $54,000 per year. With education costs rising 3-5% annually, a child born today could face total four-year costs of $120,000-$300,000. Starting early makes the math dramatically easier: investing $200 per month from birth with a 7% return yields roughly $86,000 by age 18, covering most of public university costs.

Tax Benefits of 529 Plans

Federal tax-free growth is the primary benefit. If you invest $50,000 over 18 years and it grows to $100,000, the $50,000 in gains is never taxed when used for education. Over 30 states also offer state income tax deductions or credits for 529 contributions, typically ranging from $2,000-$10,000 per year per beneficiary. Some states offer tax benefits only for contributions to their own state plan, while others allow deductions for any 529 plan.

What If Your Child Does Not Attend College?

529 funds can be transferred to another family member without penalty: a sibling, cousin, parent, or even yourself. Since 2024, unused 529 funds can be rolled into a Roth IRA for the beneficiary, up to $35,000 lifetime, provided the 529 account has been open for at least 15 years. Non-qualified withdrawals incur income tax plus a 10% penalty on the earnings portion only, not on your original contributions.

Choosing the Right 529 Plan

Compare expense ratios, investment options, and state tax benefits. Direct-sold plans (purchased directly from the state) have lower fees than advisor-sold plans. Look for plans offering age-based portfolios that automatically shift from aggressive to conservative as your child approaches college age. Vanguard, Fidelity, and TIAA manage many of the top-rated state plans with expense ratios under 0.20%.

Frequently asked questions