Lump Sum

Will and Dave map out a plan to max out the 529 education plans for his two, young daughters.

QUESTION: Will has a 529 education plan set up for his 3-year-old daughter and just had another baby two weeks ago. He has the emergency fund funded and is out of debt except the house. He also has a certificate of deposit worth $21,000. He wants to max the 529 plans out in one fell swoop, and wants to know how much it will take to make that happen.

ANSWER: Right now it takes a little over $40,000 to go to a state school, including tuition, dorm and dorm food. The inflation rate has been about 7%, so that will equal about $150,000 over 18 years. In a good growth stock mutual fund averaging 12%, you’d need about $18,000 each.

If you split the $21,000 certificate of deposit between the two of them, you’ll almost have it. You can add a little in a few years to finish it off. Be careful, though … you want to control where the investments go in a 529.