Family Finance

Fund My Kid's Future

529 vs. brokerage. College-bound vs. not. See which account wins - and exactly how much the IRS takes under each path.

Child & Contributions

Typically 18 (college) or 21 (UTMA/brokerage).

Rates & Tax Assumptions

Historical S&P 500 average is ~10%; 7–8% is a conservative estimate.
Used to calculate 529 non-qualified penalty and brokerage tax drag.
Typically 0%, 15%, or 20% depending on income.

Path Comparison at Target Age

Verdict
Fill in fields to calculate
Total Contributions
--
Your money going in
Raw Projected Balance (529)
--
Full tax-free growth
Path A - College: 529 Net Spendable
--
Tax-free for qualified education expenses. Best option for college.
Path A - College: Brokerage Net Spendable
--
After capital gains tax on profits
Path B - Non-College: 529 Net Spendable
--
After 10% penalty + income tax on earnings
Path B - Non-College: Brokerage Net Spendable
--
After capital gains tax on profits. Best for non-college use.

Invest Now, and Your Kid Will Thank You Later...

It's time to start investing. Open a brokerage account with AFFILLIATENAME to start investing today.

Start Investing on AFFILLIATENAME
Full Disclosure: This is an affiliate link. If you sign up, the brokers might toss a few coins my way. It doesn't cost you a penny extra, but it does help keep the math running and the lights on around here. Win-win.

How It's Calculated

529 Plan: Compounds at the full expected return, tax-free. Qualified education withdrawals are 100% tax-free. For non-qualified use, only the earnings (not contributions) are subject to income tax plus the 10% penalty.
529 Penalty Math: Total Penalty = Earnings × (Income Tax Rate + 0.10). Your contributions always come out penalty-free - only the growth is taxed.
Taxable Brokerage: An annual "tax drag" is applied - approximately 1.5% dividend yield taxed at your ordinary income rate each year. At sale, long-term capital gains tax applies to total profits (balance minus contributions).
Custodial Roth IRA: Not modeled here, but worth considering if your child has earned income - contributions can always be withdrawn penalty-free, and earnings grow tax-free if held to age 59½.

College-bound: 529 wins clearly. Non-college: a taxable brokerage (or UTMA) almost always beats a penalized 529 withdrawal. The longer the time horizon, the bigger the 529 advantage for education.

Ad Slot: 6674083199
Ad Slot: 1476762689
Ad Slot: 1476762689