Question

A man wants to set up a 529 college savings account for his granddaughter. How much would he need to deposit each year into the account in order to have $50,000 saved up for when she goes to college in 17 years, assuming the account earns a 5% return.

Answer 1

The amount that the man who wants to set up a 529 college savings account for his granddaughter needed to deposit each year to have $50,000 saved in 17 years at 5% return is $1,842.82.

How is annual payment or deposit calculated?

The annual payment or deposit that the man needed to deposit annually to have $50,000 can be computed using an online finance calculator.

It can also be computed using the annuity factor of 5% for 17 years to divided the total sum of $50,000.

The 529 plan, according to available data, is a tax-advantaged or tax-qualified savings plan designed to encourage individuals to save for future education costs of their relations or for themselves.

Data and Calculations:

N (# of periods) = 17 years

I/Y (Interest per year) = 5%

PV (Present Value) = $0

FV (Future Value) = $50,000 ($31,327.88 + $18,672.12)

Results:

PMT = $1,842.82

Sum of all periodic payments = $31,327.88 ($1,842.82 x 17)

Total Interest = $18,672.12

Thus, the amount that the man who wants to set up a 529 college savings account for his granddaughter needed to deposit each year to have $50,000 saved in 17 years at 5% return is $1,842.82.

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