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Future Value Formula:
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A 529 plan is a tax-advantaged savings plan designed to encourage saving for future education costs. Named after Section 529 of the Internal Revenue Code, these plans are sponsored by states, state agencies, or educational institutions.
The calculator uses the future value of annuity formula:
Where:
Explanation: This formula calculates the future value of a series of regular monthly contributions earning compound interest over time.
Details: Early and consistent saving for college education can significantly reduce future financial burden. 529 plans offer tax advantages that can accelerate growth compared to regular savings accounts.
Tips: Enter monthly contribution amount in dollars, annual interest rate as a percentage (e.g., 5.5 for 5.5%), and investment period in years. All values must be positive numbers.
Q1: What are the tax benefits of 529 plans?
A: Earnings grow tax-free, and withdrawals are tax-free when used for qualified education expenses. Some states offer additional tax deductions.
Q2: What counts as qualified education expenses?
A: Tuition, fees, books, supplies, equipment, and room and board for college, graduate school, or vocational schools.
Q3: Can 529 funds be used for K-12 education?
A: Yes, up to $10,000 per year can be used for K-12 tuition at public, private, or religious schools.
Q4: What happens if my child doesn't go to college?
A: You can change the beneficiary to another family member, use funds for yourself, or withdraw funds (with taxes and penalties on earnings).
Q5: Are there contribution limits for 529 plans?
A: Yes, most states have limits ranging from $235,000 to $529,000 per beneficiary, depending on the state plan.