529 calculator

What this number means

The total is what the account holds when the first bill arrives, if the return you entered holds throughout and you keep contributing.

The investment growth figure is what compounding contributes on top of what you put in, and over fifteen or eighteen years it is often close to half the total. That is the argument for starting early, and it is why the same monthly amount started five years later produces a substantially smaller number.

What this deliberately does not do is project college costs. Tuition inflation has run above general inflation for decades and varies enormously between institutions and between in-state and out-of-state. Any calculator that tells you what college will cost in 2044 is guessing at several compounding uncertainties at once. This page tells you what you will have. What it will buy is a question worth researching separately.

How this is calculated

• Standard compound growth with regular contributions: P x (1 + r/12)^(12t) for the existing balance, plus the future value of the monthly contributions.
• Contributions land at the start of each month, so each earns that month's return.
• Growth is rounded to whole cents as it is credited.

A single constant return is a simplification and it is the one worth understanding. Most 529 plans use age-based portfolios that shift from equities toward bonds as the beneficiary approaches enrolment, so the expected return genuinely falls in the later years. Modelling that properly needs a glide path this page does not ask for, which is why the hint suggests using the lower end of your expectation.

529 plans are established under Section 529 of the Internal Revenue Code. Earnings grow federal income tax free and withdrawals for qualified education expenses are not taxed. Non-qualified withdrawals are taxed on the earnings plus a 10 percent federal penalty, with exceptions.

What this does not account for

• College cost inflation. Deliberately excluded. Projecting it eighteen years out compounds a guess on top of a guess.
• Returns that vary. A constant rate is a poor model for an investment account, and the sequence of returns near the end matters more than the average.
• Plan fees. Expense ratios vary substantially between state plans and compound against you over the full period.
• Age-based glide paths, which lower the expected return in later years.
• Your state's tax deduction or credit, which is real money in the year you contribute and varies by state.
• Financial aid, scholarships and grants, which change how much you actually need.
• Contribution limits. Plans have aggregate caps, and contributions above the annual gift tax exclusion have their own rules including a five-year forward election.

Questions

Do I have to use my own state’s 529 plan?

No. You can open almost any state’s plan regardless of where you live, and the money can be used at eligible institutions anywhere. The reason to prefer your own is a state income tax deduction or credit for contributions, which forty states and the District of Columbia offer in some form. Seven of them, Arizona, Arkansas, Kansas, Minnesota, Missouri, Montana and Pennsylvania, go further and give the deduction for contributions to any state’s plan. Ten states give no deduction, and seven of those have no income tax at all.

Is the home-state deduction always worth taking?

Not always. It is worth roughly your contribution multiplied by your state income tax rate, once, in the year you contribute. A plan with meaningfully lower fees or better investment options can outweigh that over eighteen years. If you live in a state with no income tax, there is no deduction to weigh at all and you should simply pick the best plan available.

What return should I assume?

Most 529 plans offer age-based portfolios that start heavily in equities and shift toward bonds as the beneficiary approaches college age. That means the effective return falls over the period, and a single fixed rate across eighteen years overstates the later years. Using a rate at the conservative end of your expectation is the honest way to use this page.

What happens if the money is not used for education?

Earnings withdrawn for anything other than qualified expenses are subject to income tax plus a 10 percent federal penalty on the earnings portion. Your contributions come back without penalty because they were already taxed. There are exceptions, including scholarships, and since 2024 a limited route to roll unused funds into a Roth IRA for the beneficiary subject to conditions and lifetime caps.

Does a 529 hurt financial aid?

Less than most people expect when the parent is the account owner. A parent-owned 529 is treated as a parental asset for federal aid, assessed at up to about 5.64 percent, rather than as a student asset at 20 percent. Ownership by a grandparent used to create a larger problem on withdrawal, and recent FAFSA changes have largely removed that.