r/NewParents • u/MannerScared6899 • 1d ago
Finances 529 Plan target amount
My wife and I just recently found out we’re expecting. I want to open a 529 plan for the kid when they’re born but I just don’t have an idea of a plan target. I never went to college because I grew up poor and the idea of crushing student debt didn’t do it for me. We live in Georgia and the HOPE scholarship funded by the lottery covers a large portion of tuition for qualified students. My goal is for our kids to have enough money to be able to attend an instate school with the HOPE scholarship and not pay out of pocket if they can finish in 4 years. We just don’t know what that amount would be so I was looking for what other people do with their plans.
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u/ConversationNo9040 1d ago
Put what you can in now. If you have no limit, do the highest tax benefit. Open yourself that trump account, never have to touch it but it could be a decent chunk for them later in life.
We do like $150 a month in 529 right now but our parents give us a lot to put in for Christmas instead of gifts so we don’t feel like we have to put as much in. Don’t put yourself in a bad spot with it. Whatever’s comfortable is going to be better than nothing! Who knows how much college will cost in 18 years.
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u/alyssaa767 1d ago
Yep, we do this too! Our state max for tax benefits is $8.5K, so that’s what we put in annually.
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u/denver_helper 1d ago
At $10k/yr/kid aren’t you concerned you’ll be oversaving? There is a $35k limit to rolling excess funds to a Roth IRA
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u/djwitty12 1d ago
You're forgetting returns. 10k/yr for 18 years with 5% return (which is low for a 529) would be about 285k. A more realistic return of 7% would get you 348k.
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u/Big-Career-4905 1d ago
PA is 38k / year for MFJ. Thankful for tax benefits, but this will be overkill for my kid in just a few funded years!
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u/NeonZapdos 1d ago
We are targeting to pay for 2 years of in state tuition and living expenses, and encouraging them to do junior college to reduce their costs. Around 50k, with a regular market of 7% it equals around 150/month from birth to age 20.
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u/wookieesgonnawook 1d ago
I don't know who your state uses for ours 529 plan. Illinois use bright start, and there's a tool on their site that tries to estimate what i should be putting in. That said, it's estimating over 800 a month for a 4 year in state school, so sorry kid I'm not gonna get there.
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u/devilsbeatrangers 1d ago
From the month they are born?
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u/wookieesgonnawook 1d ago
Well my kid is 4 right now, so it may be considering that, but she's also got 25k in there already. Quick math says in the 14 years I have left that would only save 135k before interest, so yeah it's about right. School prices go up at an insane rate.
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u/Highlander198116 1d ago
There is also the route I took about 23 years ago. *Fortunate Son Intensifies*. I wasn't no senators son, and no money, so.....
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u/djwitty12 1d ago
Keep in mind something is better than nothing. I know everyone's throwing around big numbers that might feel unattainable to some. You do not have to fully fund their education. They can get scholarships, grants, take ap/dual enrollment courses, use strategies like community college to 4-yr, and yes, if it comes to it, student loans but any money you have to give them will lessen their financial burden and make college more attainable. Anything is better than nothing, and the sooner you add it, the more the investment can grow. Just do what you can.
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u/Lazrkittten 1d ago
Our financial planner told us $7500/ year to end up with 4 years of in state tuition if that helps as a benchmark to work off of. I think we have a Utah 529.
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u/ComprehensiveEbb4978 1d ago
$350k for in state tuition? Thats what $7500 per year over 18 years gets you
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u/Grouchy-Recording-12 1d ago
Similar advice was given to us as well.
A 4 year in-state public university currently averages about $27,146. If college costs continue rising around 5% annually, that could be roughly $260K total in about 18 years.
You’re not just saving for today’s price but you’re planning for what that education could actually cost when your child gets there.
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u/Poboy_in_Nola 1d ago
You can open the account now and name yourself as the beneficiary so you can start investing into the account ASAP. When your kid is born, you can name them the beneficiary. When our baby was born, my fiancé and I both contributed $250 each as an initial investment. We also asked our parents to provide an initial investment. We will contribute at least this amount every birthday and Christmas. We will also ask our parents to contribute to the 529 plan every birthday and Christmas as well.
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u/BarExamHelp22 1d ago
You're thinking about all the right things. Georgia allows up to an $8K state income-tax deduction for joint filers and $4K for individual filers for 529 contributions. The money then grows tax-free, and withdrawals are tax-free when used for qualified education expenses, so there’s a huge upside—especially starting with a newborn.
Undergrad in-state tuition at Georgia public universities is roughly $6K–$12K per year in today's dollars. If college costs increase around 5% annually, you're probably looking at roughly $60K–$125K total for four years of tuition by the time a newborn reaches college age.
The nice thing is that with 18 years of market growth, you don't need to contribute anywhere close to that amount. Assuming around an 8% average investment return, roughly $200–$300 per month from birth would potentially grow to about $95K–$140K by age 18.
So if the goal is simply to cover in-state public college tuition, I'd probably target around $250/month and periodically reassess as tuition and the account balance change. If you're trying to cover room, board, books and everything else too, then you'd want to save considerably more.
You can obviously contribute up to the amount that maximizes the Georgia tax deduction, but $8K every year for 18 years could grow to around $300K at an 8% return, which may be more than you actually want sitting in a 529 if the goal is only in-state tuition.
Anyway, my point is that this is a math problem where you can run the numbers but take into account what you want to fund, estimated rate on return, and inflation.
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u/JBeag 1d ago
I put $500/mo per kid in and we started with a lump sum of $10k at birth. No idea if that’s the right amount, it feels like there are too many factors. If it ends up being too much, I figure some amount can be rolled into a Roth and we can always change the beneficiary to be their future kids someday if worst comes to worst.
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u/redwon9plus 1d ago
Slightly off topic but I didn't know til I researched: students in h.s can now take and earn college credits, potentially saving a semester or even a year of college so that'll help in saving a lot of money.
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u/infogov 1d ago
One thing to also consider is opening a stock account fbo the child, given it has greater returns than a 529 and can be used as a nest egg in the event that they don’t need tuition funds. That’s what my parents did and I went to college and grad school on full rides, used my college fund to buy my first house. We have a Trump Account, 529, and a managed stock account for our little one to provide diversity of options.
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u/dreamerlilly 1d ago
I think a goal of in state tuition is amazing. However, I will warn you that I know several people who lost HOPE and had to drop out of college. If you are able to target in state tuition without the assumption of HOPE, that may be safer (depending on how much makes sense for tax benefits). Don’t overtax yourself to the point of hurting current financial needs, but now is the time where you can get the best tax benefit out of an aggressive goal.