Answer: Quite possibly. Mortgage paydowns and retirement plans are often better places to stash savings.“We recall you advising that 529s may not be the best investment and paying down loans with interest may be money better spent, and also that there are ample opportunities for college aid.
If you are prosperous enough to be sure of never applying for tuition assistance, then 529 accounts are clearly a winner. But if your kids end up qualifying for aid, you will discover that 529s work no great magic. Indeed, they can have negative returns in purchasing power. Let’s see what that means in dollars. Your spreadsheet is a bit complicated because it has escalating monthly contributions for two youngsters who are a few years apart. I’m going to simplify it by assuming you are investing a flat $5,000 a year for 12 years. You put in $60,000. What’s that going to be worth in 2034?
I did my own spreadsheet, and I boosted your effective return by giving you credit for the tax savings from deducting contributions. I’m guessing your state and city tax bracket is 9.85%, applicable to upper-middle-incomers. So you could put in $5,546 a year and then get back $546 in your tax refund, for a net cost of $5,000.
The CSS Profile is a far more comprehensive dive into your finances. For example, it considers a 529 owned by a grandparent and naming either Harry or Sally as beneficiary to be part of the family’s wealth and subject to assessment. Fafsa doesn’t count grandparent 529s in wealth.