529 Calculator: Saving for College Without the Guesswork

The Ortegas opened a 529 the week their daughter was born, mostly on a relative’s advice, without running a single number — it wasn’t until a decade later, comparing the balance to a friend’s plain savings account, that they saw what the tax-free growth had actually bought them. College costs rise faster than general inflation almost every year, which is exactly why “I’ll just save in a regular account” quietly falls behind. A 529 plan’s tax-free growth (when spent on education) is designed to close some of that gap — but only if you start early enough for compounding to actually matter.

What the calculator projects

A monthly contribution, expected return, and years until college combine into a projected balance — and separately, what that balance would have been in a regular taxable account after accounting for tax drag on the growth.

$200 a month for 13 years at 6% growth builds to roughly $47,000 — tax-free at withdrawal if spent on qualified education expenses, which meaningfully beats the same growth in a taxable account once you account for taxes on the gains along the way.

The “what if they don’t go to college” objection

529 funds aren’t locked to a single beneficiary — they can be redirected to a sibling or other qualifying relative, used for some non-college education paths, or (since a recent rule change) partially rolled into a Roth IRA for the beneficiary under specific conditions. The “wasted if unused” fear is less true than it used to be.

State tax deductions — check yours specifically

Many states offer a state income tax deduction for contributions to that state’s own 529 plan — but not all states offer this, and some let you deduct contributions to any state’s plan. It’s worth checking your specific state’s rule rather than assuming, since it can meaningfully change which plan makes sense to use.

Front-loading versus monthly contributions

A large lump sum contributed early gives compounding more years to work versus the same total spread out monthly — the same logic as investing generally. Some plans also allow “superfunding” (contributing several years’ worth of gift-tax-exclusion amounts at once) for those who can afford it.

What happens to unused 529 money?

Non-qualified withdrawals are taxed on the growth portion and typically incur a penalty on that portion too — but redirecting to another beneficiary or the new Roth rollover option usually avoids this entirely.

Should I use a 529 or just save in a brokerage account?

If the money is genuinely earmarked for education, the tax-free growth usually wins. If there’s real uncertainty about whether it’ll be used for education, the flexibility of a taxable account has its own value.

---

Disclaimer: This article is for general information only and is not financial or tax advice. Consult a qualified advisor before making investment or tax decisions.