Recommended 529 Plan Amounts By Age: Careful Saving Too Much

From a financial perspective, one of the best things to come out of the coronavirus-induced market meltdown is being able to contribute to your children's 529 plans at lower index prices. Let us dig deep into the recommended 529 plan amounts by age.

The appropriate 529 plan amounts by age will help ensure that you accumulate enough to pay for your child's college education comfortably. At the same time, the right 529 plan amount by age will also ensure that you don't over-invest if you don't want to.

Given parents are investing for an expense that might not occur for another 10-18 years, it's easier to invest in a 529 plan during times of turmoil. You want to have the right about in a 529 plan by age so you don't overfund or underfund the college savings account.

Investing In My Daughter's 529 Plan

Originally, I had only planned to invest $15,000 into my daughter's 529 plan in 2020. I was nervous about the stock market after a 10-year bull run. However, the stock market started selling off in February and March 2020. Thus, I decided to contribute more to her plan.

See my historical 529 contributions below.

Recommended 529 Plan Amounts By Age
Contributed $30K in daughter's 529 plan in March 2020

The stock market kept on tanking until I ran out of the maximum bullets allowed. By the end of March 2020, I had ended up superfunding $75,000 into my daughter's 529 plan. After making a stock market bottom prediction in March 2020, I put my money where my mouth was and bought.

If I had contributed more, I would have violated the superfunding rule, which allows families to front-load five years worth of contributions ($85,000 per donor/$170,000 per couple for 2023) without having to file gift taxes, while protecting their lifetime gift and estate tax exemption.

The world felt like it was coming to an end in March 2020. So, my wife and I decided to have her dollar-cost-average into our daughter's 529 plan by $15,000 a year for the next five years just in case the recovery would take years.

When the stock market began rebounding in April, so did both of our children's 529 plans. Today, our son's 529 plan account is only about twice as large, despite being 3X older.

This is when I began to wonder what is the appropriate 529 plan amounts by age. I was beginning to feel like we had over-contributed to our daughter's 529 plan. However, thanks to the likely incessant rise in college tuition, continuing to contribute to a 529 savings plan makes sense.

Why A College Degree Is Getting Devalued

One of the most important things all parents and kids who want to attend college should know is this: Partly due to the coronavirus, the value of college has declined.

While this decline in value has been ongoing for years and started well before COVID-19 arrived, with tens of millions of people sheltering in place for months, the depreciation has accelerated.

A student or parent should not have to spend the same amount of tuition for classes that are being taught online instead of in the physical classroom. An important part of the college experience is in-person networking to build lifelong connections and friendships. Moving online impedes this invaluable opportunity.

It is already too late for many of us who spent big bucks and many years getting our college degrees. However, it is not too late for our children to make wiser educational and financial decisions about their higher education.

If we do nothing, then we will be creating another generation of massively indebted and highly dissatisfied college graduates who are unable to find meaningful work. Debt and a lack of meaningful work hurt relationships, delay saving and investing, delay or eliminate family formation, and create deep levels of dissatisfaction.

We all know some messed up, angry people. They could have had better lives if they weren't so burdened by student loan debt and had more enjoyable occupations.

Key Points On Education:

  • Online education devalues a traditional college education.
  • It is nonsensical for a student to still have to spend 4-5 years before being awarded a college diploma when the internet has made research, learning, and communication much quicker.
  • Unless you are already rich or receive grants, paying full private school tuition is fiscally unwise because data shows that there is no discernible income difference between both types of college graduates from private or public schools.
  • Even public school tuition is becoming too expensive given a consistent decline in state-supported funding. No type of education is increasing in value.
  • From a financial standpoint, it's more beneficial to learn everything for free online, develop skills in a high demand field, take an apprenticeship, and get to work sooner after high school.

To come up with my recommended 529 plan amounts by age, we must make several assumptions. I will provide three columns to address these assumptions. Then you can follow the column that most closely matches your situation and beliefs.

529 Plan Assumptions:

  • You are a rational parent who likes to take advantage of tax-advantageous accounts to potentially grow your investments quicker. You believe that if you are going to invest for your child's education, then you might as well invest in a 529 plan where the contributions compound tax-free.
  • The contribution range per year is between $5,000 and $30,000. The range takes into account contributions from single parents, dual-income parents, grandparents, and rich relatives.
  • The compounded return range is between 0% – 7%. This range accounts for bear markets and lower returns as child gets closer to attending college. Lower returns are due to a greater shift to bonds.
  • The goal is to pay for between 50% – 100% of college expenses when the time comes. The percentage range takes into consideration parents who do not have as much money or have lower investment returns. The lower percentage also accounts for parents who want their children to have more skin in the game.
  • For 2020, the average public tuition & fees cost is ~$10,500 a year for public-instate, ~$23,000 a year for public, out-of-state, and ~$37,000 for private universities according to US News & World Report. Expect these tuition figures to go up by about 4-5% a year forever. For 2024, the average tuition is at least 15% higher!
Average Tuition & Fees For College 2019-2020

More 529 Plan Assumptions:

  • College tuition and expenses will increase by an average of 3% a year. This is despite the value of college declining. It is very hard to stop momentum, especially due to growing international demand.
  • Some of the 529 plan may be used to pay for grade school tuition and expenses. As of 2020, $10,000 a year can be used from a 529 plan per student per year for private, public or religious elementary, middle, and high school tuition.
  • Financial support for education stops at 25. Age 25 is old enough for a child to have started and finished a Master's degree. It is also old enough for the adult child to get on the path to financial independence. You plan to spend down 100% of the 529 plan after 25 years.
  • Contributing too much is an inefficient use of funds because the money could also be spent on living a better life. That said, you can now roll over leftover 529 funds into a Roth IRA thanks to Secure Act 2.0. As of now, the lifetime conversion limit is $35,000, which makes contributing to a 529 plan even more valuable.

Now that we have these assumptions in place, let's look at the recommended 529 plan amount by age.

Below is my recommended 529 plan amounts by age separated into three columns. Each of the columns accounts for the type of school your child plans to go to and how much financial aid your family will receive.

For most new families, I suggest focusing on the Medium (Bravo) column.

529 plan amounts by age chart

Low Column (Alfa)

The Low column simply assumes a $5,000 contribution per year with 0% growth to account for several bear markets during the initial 18 years. The goal is to have saved $100,000 per child by the time he or she begins college. Starting at 18, the parent uses $20,000 a year to pay for college education expenses.

Those who should follow the Low column:

  • Parents who have older children already (10+)
  • Parents don't believe strongly in the value of a college education
  • Child will go to a public university, community college, two-year college, or potentially no college
  • Child is a genius or a talented athlete and will get tuition subsidies from universities
  • Guardians have a family business
  • Parents have many children and cannot fully fund all their 529 plans

Medium Column (Bravo)

The Medium column assumes a $15,000 annual contribution every year until 18 with a 6.2% compound annual return. The goal is to have saved $500,000 per child by the time he or she begins college. After age 18, $100,000 a year is to pay for college until the 529 plan goes to 0 at age 25.

Those who should follow the Medium column:

  • Parents or guardians have a newborn or children under three
  • Guardians or parents only plan to have one or two children
  • Parents believe a college education is still valuable
  • Child is of average intelligence and athletic ability
  • Guardians or parents want to hedge against a continued rapid increase in college tuition
  • Parents or guardians have a family business
  • Parents tend to be more financially conservative

High Column (Coca)

The High column assumes a $30,000 annual contribution every year until 18 with a 7% compound annual return. The $30,000 comes from a combination of two people always contributing $15,000 each.

The two people can be both parents, one parent and a grandparent, two grandparents, and so forth. After 18, $200,000 a year is used for college tuition until the 529 plan is spent down to $0 at age 25.

Those who should follow the High column:

  • Parents have a newborn or a child who has yet to be born
  • Parents plan on only having one or two children
  • Child is of below average intelligence and athletic ability
  • Child insists on going to the most expensive private school
  • Parents are very wealthy and are willing to make their children 529 millionaires
  • Parents believe college tuition will inflate much faster than 5% a year
  • Grandparents have enough money to superfund their grandchildren's 529 plans to help reduce their estate
  • Parents who want to use the 529 plan as a generational wealth transfer vehicle

Each column represents the appropriate amount based on your goals and your child's educational goals. All columns are great goals to follow. The amounts should align with your goals and beliefs.

If you’re behind, contribute more. Or convince a grandparent or relative to contribute more. If you’re ahead, throttle your contributions and use your money for other purposes.

It would be irrational if you save based on the Low column but have a child who is one year old and you want him to go to the most expensive university in 18 years without any grants.

It would also be irrational to follow the High column if your child is already 14 years old, is brilliant, and will likely get a free ride to any school she chooses.

Whichever column you choose to follow, make sure the numbers align with your current financial situation. Understand your child's intelligence and work ethic. Know your beliefs about higher education.

Related: Recommended 401(k) Amounts By Age

529 Plan Amounts By Age Goals For My Children

My wife and I are aiming to save up to $500,000 per child by the time each turns 18. In other words, we plan to contribute a combined $15,000 a year and hope for roughly a 6.25% compound annual return. Our goal is inline with the Medium (Bravo) column.

Worst case, if our children are not smart enough to attend an in-state public university or don't get grants from a private university, then we are looking at between $100,000 – $125,000 a year all-in per child.

The cost is based on a 5% compound inflation rate for the next 15-18 years. $500,000 per child in a 529 plan will be able to cover this realistic worst-case scenario. Unfortunately, it seems like the cost of four years of a private university will cost closer to $750,000 in 2036, when our son is eligible to attend. As a result, contributing to our 529 plan may not be enough to pay for all of college.

As our children get older, we will have a better idea of their intelligence levels and work ethic. We can then adjust our contributions accordingly.

My wife and I have always been of average intelligence. Therefore, our children will likely have the same level of intelligence. We cannot count on instilling in our children a strong ethic, no matter how hard we try.

Whether you follow my Low, Medium, or High 529 plan savings amounts by age, know that investing in a tax-advantageous account for your children is better than not investing in one.

Using A 529 To Transfer Wealth

Ideally, you want to save just the right amount in each 529 plan. But if you end up saving too much, you can always just reassign the beneficiary. The beneficiary can be reassigned to your grandchildren or someone else for generational wealth transfer purposes.

Finally, in addition to building a large enough 529 plan for your kids, consider also opening up a custodial Roth IRA. By putting your kids to work, they can contribute to a Roth IRA likely tax-free.

The money will then compound tax-free over time. After five years, your child can then withdraw the money tax-free to spend on whatever they want!

If you start your kid's Roth IRA early, I'm sure they will be ecstatic when they become adults.

New 529 Plan Rollover Rules Due To Passage Of Secure 2.0 Act

Before the Secure 2.0 Act was passed, families were hesitant to open or further fund 529 plans out of fear the leftover funds would be trapped unless they take a non-qualified withdrawal and assume a penalty.

Money withdrawn from a 529 plan must use for qualified educational expenses. If not, you’ll pay ordinary state and federal income taxes (at the beneficiary’s tax rate) on the money, as well as a 10% penalty.

Now, the penalty can be waived if your kid wins a scholarship, gets into one of the U.S. military academies, receives support from an employer or for several other reasons – but that’s just the 10% penalty. You’ll still need to pay the tax bill.

Conditions Of Rolling Over 529 Into A Roth IRA

With the Secure 2.0 Act, there's a rollover allowance that starts in 2024 and comes with several limits. First is that the amount rolled over can’t be more than the Roth contribution limit, which is $6,500 this year. You also can’t roll over more than $35,000 total in the beneficiary’s lifetime. You also can’t roll over contributions or earnings from the past five years.

Another condition is that the 529 plan must have been open for at least 15 years. Experts are unsure whether changing the account beneficiary requires a new 15-year waiting period. Also unknown until the IRS issues rules is whether withdrawals of earnings from 529 plans transferred to a Roth account will be subject to the rule that requires earnings to remain in the Roth account for at least five years.

However, the rollover contributions aren’t subject to the Roth IRA income limits of $153,000 for single filers and $228,000 for joint filers this year. Families who’ve contributed to 529 pre-paid tuition plans – where they purchase tuition credits at the current rates – haven’t had to deal with the issue, since those plans refund only the contributions, which are made with after-tax money.

Diversify Into Real Estate To Fund College Education

It's too bad parents can't invest in real estate in a 529 plan. Real estate is my favorite asset class to build wealth given the combination of rising rents and rising capital values. This combination tends to build tremendous wealth over time.

That said, you can invest in real estate through a REIT, private eREIT, or physical rental properties. Personally, I've invested in all three as real estate accounts for 40% of my net worth. Stocks make up 30% of my net worth.

Since 2016, I've been investing consistently in real estate crowdfunding to take advantage of lower valuations in the heartland of America. With more people relocating to lower-cost areas of the country, I believe the heartland will see multiple decades of growth.

Take a look at Fundrise, my favorite real estate crowdfunding platform. Fundrise has diversified eREITs that provide 100% passive income and diversification. For most people, investing in a fund is the easiest way to gain exposure.


Also take a look at CrowdStreet, a real estate platform that focuses on individual deals in 18-hour cities. If you have more capital, you can build your own select fund with CrowdStreet. They've got a great platform with very intriguing deals. However, before investing in each deal, make sure to do extensive due diligence on each sponsor. Understanding each sponsor's track record and experience is vital.

Both platforms are free to sign up and explore. I've personally invested $810,000 in 18 real estate crowdfunding deals so far.

Readers, what is the right 529 plan amounts by age you're going to follow? Personally, I think the recommended 529 plan amount is between $300,000 – $500,000 for each child.

Join 60,000+ others and sign up for the free Financial Samurai newsletter. Financial Samurai is one of the largest independently-owned personal finance sites that started in 2009. 

104 thoughts on “Recommended 529 Plan Amounts By Age: Careful Saving Too Much”

  1. Im reading this post a little late, but good god what do you people do for a living that you can afford: mortgage, retirement savings, daycare, car payments, and daily living costs, and still put 15k into a 529??. I have a doctorate degree, earn >150k/year, and live well below our means, im struggling to put 3k per year into college savings.

    1. Unfortunately, getting a PhD might be the problem? It takes a long time to get and a lot of 22-23 year old college graduates are making $80,000-$200,000 all in out of school.

      Hence; the head start and higher starting pay puts them way ahead.

      It feels like getting a PhD now is more a luxury for those who can afford to get one. I considered getting one in 2012 and decided I couldn’t afford it!

      1. This didn’t answer the question. Getting a PhD is required for certain jobs, so I fail to see what that has to do with the economic reality of people being able to (or even wanting to) put away $500k per child. For one, it’s a bad economic sense for anyone outside wage-earners making a very high income, and secondly, it’s important for kids to gain access to scholarships/grants + share some of the cost (even if it’s a small portion of the overall bill).

        The 1/3, 1/3, 1/3 shared funding rule is a good starting place for people mapping out their children’s college plans. One can tweak that to meet their financial realities. For our situation, my wife and I plan on meeting ~50% of our girls’ college tuition + expenses if they choose to attend an out-of-state college. We will fully cover their costs if they stay at a public in-state school, but they’ll need to bear a higher cost if they attend a private school.

        1. If you can’t get a scholarship to get a PhD, you shouldn’t get a PhD. Once you have a scholarship, you shouldn’t need to worry about living expense and tuition for a PhD.

  2. Hi! This is so helpful. Thank you. Is there a reason only you superfunded your daughter’s account and not your wife? I am having a hard time understanding whether the 529 account should be a joint account where both my husband and I contribute to or we should have two separate 529 accounts for my daughter. Thank you.

  3. Long time Samurai reader, first post.

    Something is off for me about this article. I’m 100% onboard with 529s, I have one for each of my 2 kiddos. From the dollar amounts listed in this article, it appears we are suggesting parents pay for 100% of their kids college.

    This is insane to me – from a message standpoint. What message are you sending your kids when you pay for 100% of their college? Kids who don’t have to think (or learn) about large-sum decisions (spending $10k per semester or year on tuition, books, housing, and how to prioritize that over partying, etc.) have no clue what to do once they graduate college. They are the ones scratching their heads on why they cannot get a job because they didn’t learn any adult decision making.

    I myself graduated with $30k in student debt and it taught me lifelong valuable lessons on how to prioritize my personal finances, ask/request for loan payment forbearance when needed, etc. I plan on paying for ~75% of each child’s college tuition, they need to pay for the rest.

    When made clear to the student that they will be responsible for “some” of their college tuition, it acts as a perfect motivator to get better grades in hopes for a scholarship in their latter years of college.

  4. I just came here to perhaps gain a sympathetic ear.

    I recently realized the expense ratio for vanguards 529 100% VTI is 0.12% and the California (my residence) soclarshare program offered through TIAA following the same index has an expense ratio of 0.05% half of vanguard.

    My faith is in vanguard is for them to cut their fees eventually. And I just don’t want to go through the headache of the paper work to switch.

  5. Richard Sarle

    Many states have Max limits on 529 plans and ban additional contributions if the account exceeds certain levels; the account can grow but no more $$$ can be added; please check this

  6. I agreed that most people will probably never achieve these goals, but the numbers are not far fetch if you are the type who hope for the best but plan for the worst

    1. Kids may change majors and require more years in school
    2. Kids may need to law school or medical school
    3. Save it for grand kids

    1. The thing is, if your kids want to go to university, the figures have to be achieve one way or another.

      It could be through taking on debt, parents paying, or working part time. Of course your kid could get scholarships because she is a genius. But we shouldn’t count on that.

      I’m certainly not going to.

      1. As a grandma if I were to put a one time $15,000 in my two year olds 529 account and let’s say that was the only money he had in there how much would that be do you think by the time he is 18?

      2. You should of bought Bitcoin during March 2020! You would have been able to buy approximately 11.54 Bitcoin with an avg price of $6,500. If held until today, it would be worth over $761,0000. If you sold, you would pay long term capital gains taxes, which would still net you approximately $500,000 and no additional contributions would have been necessary for your daughter’s college education.

        Just another point of view.

    2. For point 1, the kids should get their own scholarship to cover their poor decision making.
      For point 2, the kids should get their own scholarship, or they carry the student loan, and make sure they can pay the loan off. Otherwise, no.
      For point 3, yep, but what if your kids don’t have kids? And why isn’t that your kids should save for your grandkids?

  7. Piggybacking on my last comment – it’d be much more useful if you had age on the rows, and different types of higher education on the columns (2 year college, 4 year public, 4 year private, bachelors + masters, etc.). Each element of that matrix would be the value in the account such that the guardian would no longer have to make contributions to fully pay for their child’s education, given ROI assumptions (e.g. 7% for age 0-10, 5% for age 11-15, 3% for age 16+) and expected tuition increases.

    I’m trying to FIRE after all! I want to know when I can quit my job, and one of the big metrics would be to know that my child’s education is fully paid for.

    1. Mario, it’s actually kind of scary that you aren’t able to read the analysis and think through the chart. I would encourage you to teach your children how to read and go through things comprehensively.

      One part about achieving financial independence is being self-sufficient. If you really need this much handholding, I don’t see how you can ever get there.

      FIRE is more than money. It’s also about self-sufficiency.

  8. Saying a 529 account should be between $95k and $1M by age 18 isn’t the most helpful advice. Hell, I could have come up with that without the pages and pages of pretext.

    Let’s just boil it down to, “If you don’t have much money to spare, contribute a little. If you have a lot, contribute a lot.”

    My kids are 2 and 4. I can’t exactly tell if they’re going to be geniuses or want to go to the most expensive college in the country. But thanks for letting me know my older son’s account should have between $20k and $143k.

      1. Am I missing something? If I’m reading the 529 by age chart correctly, when the child reaches 18, depending on the alpha, bravo, or charlie strategy, the recommended account value is $95k-$1M. That range is simply too wide to be useful, especially when planning for young children where your conditions are impossible to know.

        1. Ah, I see what you mean. I would take it a step further and read the sub sections of the Alpha, Bravo, Charlie columns to understand the context and where you and your child find yourselves.

          If you’d like, I can copy and paste the wording in this comment for you to make it more clear.

  9. What am I missing here?

    Your article says “For 2020, the average public tuition & fees cost is ~$10,500 a year for public-instate, ~$23,000 a year for public, out-of-state, and ~$37,000 for private universities according to US News & World Report.”

    So if I do some simple math, and figure 4 years of college, we are looking at $42,000 for public in state, $92,000 for public out of state, and $148,000 for a private university.

    Why are you killing yourself trying to save $500K for each kid?

    1. Because there’s more to college expenses than tuition and some kids aren’t going to college for many years e.g. a 1-year old.

      Got to always look ahead. Tuition inflation has historically run between 4-5% a year.

      1. MIT’s annual tuition this year is $55,510 with their estimated total costs per year being around ~$77,000. Round that up to $80k and 4 years we’re looking at $320k. 4-5% increases per year and $500k isn’t looking too crazy in a decade or so.

  10. I understand your community college and State School points. I agree with them.

    But what percentage of the population do you think are able to pay for these suggested guidelines?

    In my personal experience (mid 30’s) Most people starting to have kids-
    1) Are just finishing paying off their own student loan debt
    2) Just started taking on a mortgage in a crazy over inflated housing market
    3) dealing with Daycare costs (2 kids is average $2,500 a month)
    4) 401k’s, Personal Investments, Savings

    This just seems extremely unrealistic… $30k a year per child starting early to mid 30’s? An income bracket association would make more sense… not simply saying based off how much a parent values education.

    1. Completely agree. Maybe I’m insecure, but my wife & I have 2 kids (7y & 2y) & we’re upper middle class & relatively simple. I’ve put money in the mkt to help for college (not 529 bc it ties it down more than I think is worth (love to hear different POVs).

  11. Thanks for this post! I’m looking into superfunding next year due to some RSU growth. I like the idea of set it and forget it, and after freaking out about the cost of college (see here: I realized I need to do a lot more than the standard $500/month that is recommended per kid.

    If all works out, I’ll superfund my 2 year old and newborn’s accounts next year ($75 each) and then do the $15k per year going forward from my husband to catch any drops in the market.

    So far I have $35k in my 2 year old’s amount, and $44k to split between my kid being born in January and my future kid (who is ~ -2 or -3.) So next year I’ll try to do $140k between kid 1 and 2. At least gets us closer to their college education being taken care of. A little closer…

  12. Financial Samurai & Other readers,

    Thanks for this post FS. I have a question on contribution. I am (husband) is the OWNER of my kid’s (beneficiary) 529. Its with Utah 529 plan. Its not a joint ownershipt and its only one owner (not many 529 allow joint, quick check on Utah 529 doesn’t say one way or other). I have a question on max contribution to this plan.

    I follow that I (Owner of the plan & Father of the beneficiary) can contribute – 15K/year (without needing to file gift tax exception or others). Can my wife (Mother of the beneficiary, but the owner of the plan) can also controbute to same 529 plan – another 15K/year.

    Sound simple – strightfwd – allowing both parent (each 15k) to contribute, but I have no means to confirm this anywhere. I am not trying to get any State tax benefit or anything like (we live in Tax free state), so need to complicate if wife working or any like that.

    Don;t want to open another 529 plan for the same beneficiary – just to allow my wife to contribute to the max 15K/yr. Appreciate if you or any of your readers can provide some input here.


    1. I have the UTah 529 plan as well and I pay my wife’s part of 15K by transferring as a gift from her account (or our joint account). You can do that via the manage gift link for your kids Utah 529 online account .

      1. I am using UTMA accounts instead of 529’s for my children’s college saving. Is this a mistake? Was told at around 14 y/o I should switch them into 529’s. UTMA allows for great investing flexibility.

  13. Numbers seem out of reach for most folks. After paying the bills/mortgage, funding our own retirement, taking care of parents, etc. there isn’t that much left for most folks. Super funding the 529 is a pipe dream for most folks. I take issue with the bullet point that parents don’t value education.

  14. Rutger Hauer

    Hi Sam,

    Do you believe a disruption in higher education is occurring and will be accelerated due to COVID-19? I do. The unsustainable increases in the cost make alternatives like online education or a hybrid of online and in-person make increase the value not to mention starting at community college and transfer to a 4 year university more cost effective. As you mentioned, the value of college is declining and is ripe for disruption which is already happening (not a matter of if).

  15. These savings rates seem a bit like overkill. Scholarships, grants, etc night eat some of cost. You can also continue to pay directly for part of it out of pocket while they are in school.

    Don’t get me wrong, It’s great you are shooting for $500k per kid, but have you calculated the odds that they actually need anywhere near all of that?

    1. Completely overkill. We can do all the math we think makes sense here, but some plans won’t let you put in more money once an account gets to ~$250k. I get that the price keeps going up, but it’s extremely difficult to see how $500k per kid will somehow represent 50% of a child’s education.

  16. Hi Sam,
    Why fully count on a 529. Have you thought instead about taking out a HELOC, HEL or 2nd mortgage on one of your properties that are paid off? This way the tenants are effectively paying for your college whilst you maintain an appreciating asset.

    1. I like to separate my investments and have each investment serve a specific purpose as tax-efficiently as possible.

      Getting into debt to pay for my children’s education is not something I want to do. I like to focus on building more wealth instead.

  17. Great piece on 529s. I’ve been working in the 529 Industry specifically for 17 years now and can tell your readers to fund your 401k and Roth IRAs (assuming you qualify) first. You and your kids can borrow for college, but you cannot borrow for your retirement.

    With COVID-19 there are so many factors at play now so nobody knows what the future of college will look like. I personally have two kids and try my best to save as much as I can for each child after I fully max out my 401k and pay for other competing financial priorities. Last year I was able to put in $17k in total and this year I’m at $15k thus far. Similar to Sam, I wanted to take advantage of the market correction so I’ve been funding more than usual. However, if the market starts to shoot up again, I may put extra cash towards my primary residence (3.5% interest rate) as opposed to investing more in a 529 Plan where equities may be overvalued.

    My goal is to target around $300-350k per child and I’m a little behind schedule but catching up quickly. You definitely don’t want to overfund, but if you do, you can always leave the $ for a future generation, shift it to another family member, or take it out and pay taxes and a 10% penalty on the earnings only (not ideal). Heck, why not spend some of it in your golden years and go back to college yourself!

    All the best to you and your readers.

    529 Guy

    1. $300-$350K per child is a great goal. I definitely will reassess my contributions once the 529 plan gets over $300K. Perhaps by then, college tuition will start going down (doubtful) and I’ll stop contributing to try and get to $500K. But I bet, in 10-15 years, $500K won’t seem as much.

    2. I have looked into the optimal 529 contribution for years and I’m still not sure there is a clear answer. To me, it’s less about the criteria mentioned above and more so about risk tolerance in the event the funds cannot be used for education and must be withdrawn with penalty. It appears you determined to save $1.0 million combined for your two kids. That’s great, but what happens if something happens and only one child goes to school? Half of your savings are now susceptible to penalties and any potential tax savings are lost. I understand the point of the IRS requirements here, but it essentially “scares” me into not saving as much as I otherwise would. Thoughts on this fear and obviously you think the risk is worth it.

  18. Hospitalist

    I wonder how schools will look like after this pandemia, my daughter who is 11, her school is already planning on half school days at home, half school days on campus. They will keep only half of students on campus at any given time, at least until an effective vaccine comes out.

  19. I don’t have any children yet, but I should probably get started with researching 529 plans.

    I was also thinking with the rise of online classes, the rising cost of college, and the decreasing value of college degrees that if I were to have kids then I encourage them to pursue careers without requiring a college education, such as a web developer

  20. Canadian Reader

    Call me crazy- but I’m not planning to save anything specifically for my child’s college/university. We have funds available if she truly needs help in the future- but it’s better to have her on her own and think from the very start she will need loans/subsidies/bursaries/scholarships.

    You don’t need to be above average intelligence to get that money, you just have to put in the work and apply. And, no, I don’t feel guilty about this. “If the money is legally available, take it.”

  21. My financial advisor cannot answer this for me: I am 57, single parent by choice of an 8 year old. I’ll be 67 when he goes to college. My state offers only a tiny tax credit for 529 contributions, so disregarding that, isn’t a Roth IRA a better option for me to use as a savings vehicle for college costs? I have only the one child, no nieces or nephews, and any grandchildren are too far into the future to consider (almost 50 years till any grandkids would be going to college, most likely). It seems to me that 529s assume parents will be too young to access retirement accounts without incurring early-withdrawal penalties. What do you think? What would you do if you were me?

    1. EducatedMama

      My understanding is that the 529 is essentially a Roth with a small state tax benefit in some states that you can use for education only. So if you can max out your 401K, Roth IRA and then fund anything extra in the 529? For me it is hard to balance that with purchasing a home and paying down the mortgage (as encouraged by the FS earlier post!). :)

    2. I agree with your thinking Sue. I am in the same situation and I will be over 60 when the kids reach college age. My retirement accounts give me more flexibility than a 529, especially if the kids decide not to go to school or get scholarships. Also keep in mind that the FAFSA (Federal Student Aid Application) requires you to submit your 529 balance and reduces your child’s benefits accordingly. Another point, I work at a community college and there are many, many scholarships that go “unawarded” because students don’t apply for those scholarships. Most community college students could attend for free if they worked at applying for all the free scholarships.

      1. Since you work in a community college wouldn’t your child be able to attend for free? My brother in law went to college tuition free because his mom worked for the college (same with his siblings, they actually got to pick from a few different colleges ) He went to Arcadia which is in the Philadelphia suburbs

        1. Yes they will be able to attend community college free and the major state universities at a huge discount if i continue working that long. But, hopefully I will be retired at that point. I need to see if that benefit continues into retirement.

    3. I don’t think $6k (or $7k, in your case) is enough yearly saving to pay for both retirement and school. The higher contribution limit for 529 is important. Of course if you have retirement covered and don’t plan to save more than $7k / year for college, then I’d agree with that assessment.

  22. We fall into the Alfa column. My take is I got $200 a month for the first two years I was in college, and paid for the rest through grants, loans and working. Sure, I’ll contribute more than my parents did, it’s more expensive, but I want my kids to have skin in the game. I have three examples in my wife’s immediate family where they have degrees they aren’t using that were 100% paid for by Dad. Gotta put skin in the game, or risk not having the drive to make yourself successful.

  23. Paying for college is probably the hardest thing plan. There are so many variables. My wife and I settled on saving 50-55% for a public instate university through 529 Plans. If our kids don’t get scholarship etc, we will cover the rest through our salaries and from brokerage account investments. While we don’t get the tax benefit, we would rather have flexibility.

    I also have my doubts of about the future cost of college. Texas Universities tuitions on average grew 2.6% last year. I can’t imagine those higher estimates of 5% are sustainable.

    1. I hope you’re right the tuition doesn’t grow faster than 5% a year. I’ve seen many cases where tuition is growing by over 5% a year.

      Tuition growth is simply unsustainable. How about some tuition cuts!

      I feel comfortable in my framework on the $500,000 savings goal per child in 15-18 years after doing the math.

  24. I have three boys. We decided to fund the two oldest. We thought $100k would cover alot of a public 4 yr. in state, each. Dad has a JD and I have a bachelors. The plan was/is for all three to go to college, but thought the youngest might have some problems so didn’t fund anything for him. We front loaded $50,000 each and over time they each grew to at least the $100k that we had hoped.

    Son one, 22, just graduated. We still have $40,000 in his account. Too soon to tell, but it’s difficult to imagine him going to grad school. Son two, approaching 21, almost immediately dropped out of college, tried community college, hates it, and tells us he never wants to go back to school. $80,000 in his account. Son three, 19, has lots of issues and not sure he’ll ever go to college.

    Our kids aren’t turning out anything like we did, or at all as we had planned. We HOPE that the other two get a clue, and decide to go to school, but there’s no telling.

    Might have been better to add those additional funds to our retirement.

      1. Wow. “What would you have done differently as parents”? “I really wonder how much of it is nuture versus nature”? Just wow. You know zero about these people and right off the bat it’s their fault 2 of their kids don’t like college? First of all, not everyone is built for continued education in a classroom and secondly, not every career demands it. I am sure you didn’t mean to sound so completely condescending (giving you the benefit of the doubt here), but wow, perhaps you should think before you type.

        1. I’m wowed you would find asking advice to be offensive. There is no judgement, just asking as a parent much earlier in my journey who will likely face similar issues.

          Try to keep an open mind and not get easily offended. It will cause a lot of anxiety and unhappiness. Address your anxiety at its source instead.

          1. I love these sorts of advice columns. The idea is that you have control over everything, so you should view every outcome as related to the level of control you either did or did not sucessfully exert over someone, something, or some entity/ideal. That isn’t life. Let us know how your challenges turned out.

  25. I am trying to decide if I should start and fund (or super fund right now) 529’s for my three-year-old children or continue to monies into our Roth 401K. I believe the Roth 401K’s have the same tax benefits as the 529 but more flexibility as there are no forced distributions or limits on what you can use the money for.

    Notes: we’re mid-40’s so when the children are 18 we’ll be able to start taking distributions of the Roth 401K if need be (assuming the rules of the game don’t change). Also, we have a decent amount of taxable assets that will help fund our own retirement needs. Any constructive thoughts are appreciated, thanks.

    1. I have been reading this blog for many years and I would guess your intelligence to be above average :-)

    2. Are you making out your 401(k) pretax? It’s important anything to always max out the 401(k) before the 529 plan.

      I’m not a super fan of any Roth if you are paying more than 25% federal income tax.

      I would superfund at least one child since we went through a correction and DCA the rest.

  26. EducatedMama

    My son just turned one and with the economy in meltdown it may be a good time to start a plan for him. There are so many options for plans. As a California resident, which 529 plan would you recommend? I am aware that I have the options to enroll in other states plans which makes the choices even more abundant and harder to compare.

    1. It doesn’t really matter for CA, IMO, since we get no deductions for contributions.

      I have mine with Fidelity Because it was easy to set up and I already had accounts with them. TIAA-CREF, Fidelity, Vanguard all good. Stick with the big guys with lower fees.

  27. Thanks for putting together such a thorough analysis and recommendations for 529 by the child’s age! The future of college really is a big question. I agree that the value of in person education versus online is simply not the same. And the education system is going to keep changing significantly in the coming decades. I think your plans for your kids 529s is a smart and balanced approach. I like how your chart has three columns for low, medium and high too. Very helpful to get three different perspectives and sets of goals.

  28. Great article! We have funded our kids 529 with enough money for 4 years of public school education. If they get scholarships or grants to lower that cost they may use that money for master degree.

    On online education has been a disaster for our freshman in college. Being on campus provided her with the tutoring help she needed in her weaker subjects, and the structure of classes during the week. I am afraid to see what her grades are going to look like this semester, but she does get the choice of taking everything pass/fail which she is seriously considering. If they don’t open for the fall we might look at other options.

      1. It was all we could afford! We have 3 kids who are only 8 years apart which means we currently have over 300K saved. Seriously that has been our goal since the beginning on funding college. My wife and I are both graduates of state universities, and we both received a fine education. My wife has a PHD and paid for the entire cost with scholarships, loans and grants. Mom and Dad paid for the undergrad, but she was on her own for the rest. We will see if we stick to this plan, but that is what we have saved for.

    1. I’m aiming for 4 years of in-state public as well. CA public schools are incredible and there is no reason to go private when you live in this state IMO — unless you get some kind of crazy scholarship to private. I grew up in a state where there was one public college and while it was good, it was 30 minutes from my home and I wanted to GTFO of my home state. I went private for undergrad without understanding the cost of college at all — my parents paid for my education and I feel guilty to this day that my mom is running out of money in retirement (I plan to pay her back when I an afford it!)

  29. I too thought the internet could and should replace college as we currently know it. Seeing my daughter and her friends results and attitudes since they switched to online college has changed my perspective. The positive is their grades improved. They improved however because their all cheating! During tests they all have the Zoom app opened comparing answers. Kinda defeats the whole purpose of college.

    The hardest part they say is keeping focused. My daughter says she now has a new therapy for sleep. All she has to do is listen to an hour long professor lecture. She told me more than once she has actually fallen asleep during one.

    The biggest downfall related to online school for her is the lack of hands on learning. It’s impossible to do a chemistry lab or a relevant study when your not physically doing the study. The lack of a social framework really has put a damper on her college experience as well. It’s not all about learning, you have to include interacting with different people and cultures.

    I forget sometimes that these are 18-22 year old kids. They need the structure college provides in most situations.

    1. While I don’t necessarily condone “cheating”, I see utilizing available resources as progress. I think the education system is changing in many ways, and with technology why fight it? Think about most large decisions made in many work places. How often are the decisions made unilaterally without the input of others? Sure, it ultimately comes down to the “decision maker” but don’t they typically leverage all available resources. Wouldn’t allowing students to build social groups and knowledge resources be a positive thing? I mean, who’s to say they are even making the right decisions on the “test”. Perhaps, through this process they will be learning more valuable life lessons about pulling their own weight. Perhaps they may learn which friends are adding value, and which friends are not.

      I recall having professors in college that would let you bring in any amount of information to a test that you want. They would ask us if we want an “open book” test or not. The catch was, if we went with an “open book” test, the professor was free to incorporate anything within the resources he felt we should have on the test. You’d be surprised that even with potentially all of the answers at your finger tips, people still made mistakes. In either case, open book, using your neighbor or leveraging the internet you are learning something.

      I can tell you that when I don’t recall how to calculate something, or need a reference – I ask a friend/colleague or the internet. Why not, the information is there. Should I be looked down on as less of an asset because I didn’t know the information off the top of my head. The way I see it, I should be complimented for utilizing available assets and giving the company a viable solution within an acceptable amount of time.

      Lastly, since working from home is becoming more prominent. Perhaps your daughter and friends are just ahead of the curve. They will be well trained for future remote careers.

      1. I hear you Irish, and you make some very valid points. I guess the only pushback is that college for her is much more than just book learning. Self discovery, meeting new people with different ideas, making friends and future business contacts, partying, and hands on learning are all gone to a certain degree. Paying 25k a year for her to sit in her dorm room and copy and paste off the internet just doesn’t seem like a great deal to her or me.

        I’ll just add that she’s going to college for a marine science degree. She’s doing this because she absolutely doesn’t want to work from a office, or from home. Her joy comes from being outside, learning about nature.

        Her adjustments are minor compared to many, and she knows it, so she”s not complaining. I’m just commenting because I previously thought college could and should be done more online. Going through this with her I’ve changed my mind about that.

    2. spaceassassin

      “…During tests they all have the Zoom app opened comparing answers. Kinda defeats the whole purpose of college.”

      Does it? I’m not sure the whole purpose of college is to take and pass tests alone.

      Much of my work day consists of Zoom calls, GoToMeetings and calls with Architects, Engineers and Contractors working together to build incredible structures. In most work environments, its a team that gets things accomplished, rarely does one do it alone.

      The reason we pass most tests in “real life” such as sickness, marriage, raising kids, death of loved ones, etc. is because we learn how to use our resources and work as a Team. And the more efficient we learn to function, the more success (of all types) we typically see.

      …Your kid might be learning something else important here. Best of luck.

      1. I get what your saying assassin, and I don’t disagree. However, using technology is their strong suit. Dealing with people in person is not. The goal is not efficiency. The goal in my eyes is to prepare for a career, and learn how to deal with different people with different ideas. One could argue both are equally important.

        Either way, I enjoyed the discussion.

        Thanks, Bill

        1. Agree with Bill. Kids have their whole lives to be on freaking zoom and get data from the internet.

          College is about the life experience, not academics. Get kids on campus and in classrooms.

  30. Paper Tiger

    Your out of state public university average is just about spot on. Our daughter will be a senior this fall (thankfully)! When she was about 2 years old we started contributing $800/mo. invested in an S&P500 Index Fund for the next 15 years. When she started her Freshman year in 2017 we had an account balance of ~$315K. We moved the money into a CD ladder just before she started college.

    She currently has ~$177K left and will be around ~$125K when she graduates next year. She hopes to return for a Masters/Doctorate combined Program in about 3 years and the amount leftover should cover that. Funding her college over the years was one of the best investment decisions we could have made.

      1. Paper Tiger

        If there is any money left over I will move it back into an S&P fund and let it ride until we have future grandchildren that can fight over it. She does know how much she has left in the account. She is a Nursing major and wants to be either a Nurse Practitioner or a Nurse Anesthetist. Either will require at least a Masters and they are recommending the dual programs to also get a Doctorate of Nursing. These programs are around 100K so if she goes that route, there won’t be much left in the account when she finishes.

  31. We plan to have about $200,000 in our son’s 529 account when he’s 18. The problem with your table is the starting point. If you’re starting now, you will need to save a lot more because of inflation. It makes sense for you to save $500,000 each. For us, that’s too much. Well, my goal is to help fund 4 years at a public university.
    I don’t think saving too much is such a bad thing. You can keep it in the 529 plan and let it grow. Your grandchildren will benefit greatly from these plans if your kids didn’t use them up.
    Great job superfunding it.

  32. I started 529 plans for all 3 of my kids when they were born. Currently I have a college Junior, college Sophomore, and Junior in High school. I tried to fund each plan to about $120,000 by the time they were ready to start college. College costs vary greatly. My oldest is costing about $25,000 per year for a public out of state school (tuition and room/board), the middle one costs about $36,000 per year for an instate public school (tuition and room/board).

    It is a relief to have the money saved and ready to go vs. having to come up with the money every semester. I think something is going to have to change – I can’t see anyone spending half a million on college education.

  33. Sam, I talked to several senior administrators in higher education, and came to the conclusion that the more you save, the more you pay. If you don’t save, the university meets your needs, especially rich private universities. The fact is few students really pay the advertised full tuition. Each year, private universities left tons of financial aids un-disbursed due to lack of eligible application from admitted students. Either poor students thought they couldn’t afford private schools so never applied in the first place, or rich parents thought they didn’t need it. Small private universities are declaring bankruptcies in big chunks. The future of higher education is gonna change a looooot. The remaining big names, like Harvard, Princeton, will have to keep providing financial aids to keep enrollment. Regarding 529, I think over-saving is a bigger risk than under-saving…

    1. That is true. But there comes a point where no matter how hard you try, you cannot make it look like you are poor enough to get free college assistance. That cutoff point is lower than you think.

      I would rather take a chance on myself than take a chance on an unknown college years into the future determining whether my children get any help.

      Positioning oneself to be poorer than reality will tend to lead to lower amounts of wealth. It is a weak money mindset that needs to be abolished.

      1. I get it Sam. My financial advisor said there are better ways to save for college than 529, b/c 529 is fully evaluated towards the student’s financial status by schools. Some accounts are not evaluated, such as IUL and trusts, etc. I’m still learning about all of these. So just thought to throw this idea out for discussion.

        1. Very interesting. So if you have significant money and are ok with foregoing the tax benefits of a 529, it may be better to look at other avenues of saving. Maria, do you know how far back schools look at your earnings?

          1. Two most recent tax returns as far as I know. they change the rules each year. Schools give different weights for different types of assets while evaluation. 529 is weighted at 100% b/c it’s under the student’s name. But parent’s certain types of insurance accounts or trust are not counted at all, tho parents can use those vehicles to save for college and take the tax benefits as well. I’m still learning about all these. Another thing is that 529 does not guarantee principle at all, i.e., if market goes down, you can loose your principle. While some other tax benefit accounts can buy options to protect your principle (but cap earning too). I’m still learning about it. Since we can comfortable pay for college with income, so are not replying on 529 to pay for the entire college, and explore other vehicles. It’s just very complicated!

            1. 529 is not weighted at 100%. That’s only if a grandparent does the 529 — withdrawals from that count as the child’s income. If it’s a parent that does the 529 it counts as a parental asset.

              I know I’ll have too much saved in taxable accounts and likely too high income to qualify for financial aid, so I’m trying to max out he 529 to give my kids choice for their college.

        2. If you are interested in more “exclusive” colleges, full pay students absolutely have higher acceptance rates. Don’t believe the nonsense about “need blind” admissions for ALL students. Can ANY college or university afford to admit an ENTIRE freshman class that needs 100% financial aid? No, no they can’t so “need blind” for all is a myth. “Need blind” is for lower socio-economic kids, not middle or upper class kids.

  34. Has that ‘average intelligence’ rating been backed up by some testing? Because I am going to place you at least one standard deviation above the mean lol.

      1. spaceassassin

        Even more important not to confuse test scores with intelligence–this is a serious flaw in the system. There are good test-takers and bad test-takers; its that simple.

        Using SAT scores and similar tests as a measure of intelligence or ability is a disservice to far too many people, and it lets people like you (or my brother, another notorious poor test-taker) play coy about their intelligence.

        1. Nah, I accept the reality of my test scores that indicated average intelligence. Then I used the reality of my scores and my intelligence to try and work harder to keep up.

          Perhaps the worst thing for me would have been to get a high SAT score and high other tests scores. That would have given my a false sense of security and might hav caused me to not work as hard.

          I strongly believe it is consistency and work ethic that take people the farthest. Folks who try harder will learn more than the person who does not.

          Related: The Secret To Your Success: 10 Years Of Unwavering Commitment

          1. spaceassassin

            I absolutely agree with you in the power of consistency and work ethic, but I disagree there is a meaningful correlation between test scores and intelligence.

            When I watch high school students take the SAT, score a 1020, then go take a $600 prep course and score a 1320, I don’t agree they are any more intelligent, they learned how to take the test–that’s all.

            But in fairness to your statement, I trust you know yourself better than anyone else, although we are generally a little biased when self-rating.

            My guess as an outsider reading what you write is that you are certainly above average intelligence in many other areas. One of the most interesting classes I took in Psychology was a course on Tests and Measures, and during the course you explore and learn how many types of intelligence can be measured and how narrow the spectrum of intelligence an SAT or GRE score actually indicates.

            1. I do wonder how much my SAT score would
              Have improved if we could have afforded an SAT prep course. I remember back in 1993 in 1994 the Princeton review course was closer to $1500. That sounded absurd when I could just go to books A Million bookstore or the library and try it out myself.

              But in retrospect, I’m glad. Because everything worked out fine. I always wanted to go to William and Mary or the University of Virginia. It was clear back then that there was such great value attending. Further, going to a public high school made me see public universities as perfectly fine instead of some type of step down compared to those who went to private high schools.

  35. The table you provided is quite depressing for my situation. I had been contributing to my daughter’s 529 until age 4 when she was taken away from me in divorce and went to England.

    I stopped contributing because my ex got the 529 plan. When I regained full custody of my daughter when she was 10 I restarted contributing (15k/yr as single parent). Now she’s 14 and has almost $100k in her plan which puts me closer to the low column.

    If she had stayed with me the entire time she would have had a much larger balance especially with a lot of it coming from the bull run

    1. Hmm, I wonder if I should rename the columns from Low, Medium, High to something more neutral like: Alpha, Tango, Foxtrot.

      Each column is fine and being in the Low column could actually work out perfectly as the value of a college degree declines and a parent gets to spend their money more on a better life.

      A key attribute for the Low column:

      Child is a genius or a talented athlete and will get tuition subsidies from universities

      1. I think your table may be a bit off. If today you have an 18 year old, try to find a school that will cost $500K or a million. Michigan is about $70K per year out of state. Harvard and Stanford are about the same. There are lots of very good schools (top 25) that are half that, especially for in state tuition.

        If your child was just born this year, in 18 years, those schools may cost $500K, but not today.

        1. May I ask you which schools you are talking about? UCLA and UC Berkeley are the only two public schools
          in the top 25. Acceptance rates below 20% for both schools. Getting into top 50
          colleges is already hard enough, let alone top 25.

          1. Oops – your data may be better than mine. I am a mid-westerner – so I was thinking along the lines of Big 10 schools – Michigan, Illinois, Wisconsin. They are top 25 public schools, but if you count private schools, I think they are top 50. All pretty reasonably priced for residents. A little expensive for non-residents. I’m an Illinois grad, with a daughter going there, so I am biased.

Leave a Comment

Your email address will not be published. Required fields are marked *