04/13/19 TABLE: Comparing Egg-Builders

Comparing Egg-Builders

Parents with an annual income of $80,000 want to set aside 4% a year for their child's college education. Their federal and state tax rate is 35% (vs. the kid's rate of 20%) and they pay 20% on capital gains (vs. 10% for the child). Here's how much they would accumulate inside and outside retirement accounts by the time the child is 18:

IF YOU START SAVING WHEN YOUR CHILD IS 6: 401(k)/ROTH IRA POST-AGE 59 1/2 $46,576 INDEX FUND IN KID'S NAME $45,883 INDEX FUND IN PARENT'S NAME $41,474 401(k) PRE-59 1/2 $39,410 ROTH IRA PRE-59 1/2 $33,004 IF YOU START SAVING WHEN YOUR CHILD IS 12: 401(k)/ROTH IRA POST-AGE 59 1/2 $16,805 INDEX FUND IN KID'S NAME $16,805 INDEX FUND IN PARENT'S NAME $15,918 401(k) PRE-59 1/2 $14,219 ROTH IRA PRE-59 1/2 $12,288

DATA: BUSINESS WEEK

Return to main story