How much should I save in a 529 plan for college?
For a child born today, save $300–$500/month to fully fund a 4-year public university ($25,000–$35,000/year by 2042). For private university, $500–$800/month. Starting at birth with $400/month at 6% returns accumulates to approximately $175,000 by age 18.
Formula
Monthly Savings = Future College Cost × (1 − scholarship/aid %) ÷ FV factor for 6% over 18 years
Example
Target: $120k (4 years in-state public, 2042). Fund 75% = $90k. Monthly contribution: $260/month at 6% for 18 years → ~$96k. Starting at age 5? Need $475/month for 13 years.
How it works in detail
College costs have grown at 5–7% annually but are showing signs of slowing. Current 2024 costs: in-state public ($25k/year total), out-of-state public ($45k/year), private ($60k/year). In 18 years at 5% inflation: public ~$60k/year, private ~$144k/year. You don't need to fund 100% — students can work, get scholarships, or take modest loans. A common target: fund 50–75% via 529, cover the rest through income, aid, and student responsibility. 529 advantages: tax-free growth, state tax deductions in 30+ states, can change beneficiary. Risk: overfunding (excess has 10% penalty + taxes on earnings, though SECURE 2.0 allows $35k Roth rollover).
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How much do I need to retire?
Multiply your annual spending by 25. If you spend $60,000/year, you need $1,500,000. This is the 4% rule from the Trinity Study (1998) — withdraw 4% annually with a 95%+ historical success rate over 30 years.
How much should I contribute to my 401(k)?
At minimum, contribute enough to get your full employer match (free money — typically 3–6% of salary). Ideally, contribute 15–20% of gross income to retirement accounts total (401k + IRA). The 2024 401(k) limit is $23,500 ($31,000 if you're 50+).
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