What is the 529 College Savings?
A 529 plan grows federally tax-free when used for qualified education expenses, and most states offer a deduction or credit on contributions. Funds cover tuition, fees, room and board, books and computers.
College costs have inflated at roughly 5% a year, well above general inflation — which is why a degree costing $32,000 a year today can exceed $77,000 a year by the time a six-year-old enrolls.
Formula & worked example
Monthly = (Future cost − existing savings grown) × i / (((1+i)N − 1)(1+i))
Worked example: $32,000 a year today, four years of college, child aged 6 (12 years away), 5% cost inflation. The four-year bill reaches about $247,700 — nearly double the $128,000 it would cost today. With $12,000 saved growing to $24,600, you need about $1,056 a month.
How to use this 529 college savings calculator
- Enter the current annual cost of your target school type.
- Public in-state runs $25–30k a year all-in; private $60–80k.
- Use 4–6% for college inflation — it consistently exceeds CPI.
- Shift to conservative investments in the final 3–4 years.
Smart tips
- Most states offer a tax deduction or credit for 529 contributions — check your own state's plan first.
- Up to $10,000 a year can be used for K-12 tuition, and $10,000 lifetime toward student loan repayment.
- Unused 529 funds can now be rolled into a Roth IRA for the beneficiary, subject to limits and a 15-year account age.
- A 529 owned by a parent has minimal impact on financial aid — far less than assets held in the child's name.
- Age-based portfolios automatically de-risk as college approaches; check your plan uses one.
Frequently asked questions
How much should I save in a 529?
It depends on target school and timeline. Funding one-third of expected cost is a common realistic goal, with the rest from income, aid and loans.
What if my child does not go to college?
You can change the beneficiary to another family member, roll up to $35,000 into their Roth IRA, or withdraw with tax and a 10% penalty on earnings only.
Are 529 withdrawals tax-free?
Yes for qualified education expenses. Non-qualified withdrawals face income tax plus a 10% penalty on the earnings portion.
Does a 529 hurt financial aid?
Minimally. A parent-owned 529 is assessed at up to 5.64% in the aid formula, versus 20% for assets owned by the student.
Want the theory behind the numbers? Read our college savings guides on the Money Blog.