Is there a better vehicle than 529 for college savings right now?

[Anonymous]

Anonymous wrote:

Anonymous wrote:Our 529 offers a CD option. DS has 7 years until college and I've been using a target graduation date option but returns haven't been good mostly because bond funds have sucked instead of being a counter balance to stocks. I'm thinking of sticking half the money in a CD option and half in an S&P 500 index fund within the 529, then gradually shifting more of the money into CDs within the 529. Is this a bad idea?

When my DD was 7, I was fully in stocks. The account doubled by the time they were college age. For anyone who is saying they are underwhelmed by the results of their 529, you need to adjust your investment choices. The target age funds are too conservative in my view.

Win big or lose big was your strategy. Glad you're happy with the results.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Our 529 offers a CD option. DS has 7 years until college and I've been using a target graduation date option but returns haven't been good mostly because bond funds have sucked instead of being a counter balance to stocks. I'm thinking of sticking half the money in a CD option and half in an S&P 500 index fund within the 529, then gradually shifting more of the money into CDs within the 529. Is this a bad idea?

When my DD was 7, I was fully in stocks. The account doubled by the time they were college age. For anyone who is saying they are underwhelmed by the results of their 529, you need to adjust your investment choices. The target age funds are too conservative in my view.

But I knew someone who lost 1/3 of her daughter's college savings due to market timing.

The year before my kid started college I moved the money to something more conservative than the 529 target year fund, so that I would not run the risk of losing any money. My preference....

[Anonymous]

No one is doing the prepay option? It's not tied to the market, you pay 2023 prices for whatever year they will be in school. I did the aggressive mutual fund option and I'm happy with the results, but if I were doing it over again I think I might have gone 50/50 prepay and mutual fund.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Roth or regular investment account.
I will never understand why people can't take some chances with $15k-$20k in growth stock when kids are young. Same people have no problem putting $50k-$100k into some lousy fund offered by 529 and claim tax advantage. Then take out a little more than the put in when considering inflation. Why not put it in a mattress.

You're under selling 529s. The Virginia 529 offers a total stock market index fund with a 0.069 expense ratio. The tax deduction + tax free withdrawal readily beats using a brokerage account to buy VTI (with a 0.03 expense ratio).

This^^^. The Virginia American Funds 529 is one of the best out there, even if you don't live in VA. The investment choices are top notch and the fees are low. We used that for all of our kids and will continue with it for grandkids

[Anonymous]

Anonymous wrote:OP again - ok so leaning towards 529, but do we think I should put in all 3 (divided evenly) or put all in oldest, and then switch to others later?

You can divide evenly. However, it is simple to switch between them if needed later (ie one kid gets more merit or goes to a cheaper school).

[Anonymous]

Anonymous wrote:

Anonymous wrote:Our 529 offers a CD option. DS has 7 years until college and I've been using a target graduation date option but returns haven't been good mostly because bond funds have sucked instead of being a counter balance to stocks. I'm thinking of sticking half the money in a CD option and half in an S&P 500 index fund within the 529, then gradually shifting more of the money into CDs within the 529. Is this a bad idea?

When my DD was 7, I was fully in stocks. The account doubled by the time they were college age. For anyone who is saying they are underwhelmed by the results of their 529, you need to adjust your investment choices. The target age funds are too conservative in my view.

+1

And remember that when your kid is 15, they are 3 years from starting college, but 7 years from you paying for the final 2 payments of college/undergrad. So if you are comfortable, you can keep a portion still in aggressive as you are 6-7 years out from "needing it".

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Our 529 offers a CD option. DS has 7 years until college and I've been using a target graduation date option but returns haven't been good mostly because bond funds have sucked instead of being a counter balance to stocks. I'm thinking of sticking half the money in a CD option and half in an S&P 500 index fund within the 529, then gradually shifting more of the money into CDs within the 529. Is this a bad idea?

When my DD was 7, I was fully in stocks. The account doubled by the time they were college age. For anyone who is saying they are underwhelmed by the results of their 529, you need to adjust your investment choices. The target age funds are too conservative in my view.

But I knew someone who lost 1/3 of her daughter's college savings due to market timing.

The year before my kid started college I moved the money to something more conservative than the 529 target year fund, so that I would not run the risk of losing any money. My preference....

Well obviously, the year before your kid starts college, 75% of it (or more) should be in lower risk investments.
In the same manner, one kid was 2 years from college at the 2016 election. We thought the market was going to tank afterwards, so for that kid we pulled 75-80% into lower risk. The kid who remained in added over $60K to their 529 in gains over the next 6 months.

Do we regret pulling it out---No, because it could have just as easily had a downturn and we needed that money for college in 2 years. The other kid didn't need it for 7 years, so they had time to weather a potential downturn.

[Anonymous]

Anonymous wrote:No one is doing the prepay option? It's not tied to the market, you pay 2023 prices for whatever year they will be in school. I did the aggressive mutual fund option and I'm happy with the results, but if I were doing it over again I think I might have gone 50/50 prepay and mutual fund.

Prepays are not the best. I know MD is a F*"'d up mess to deal with. And what if you move/your kid does not want to attend an in-state school? Then it is not a good idea. Better to invest the money and have options.

[Anonymous]

Anonymous wrote:

Anonymous wrote:No one is doing the prepay option? It's not tied to the market, you pay 2023 prices for whatever year they will be in school. I did the aggressive mutual fund option and I'm happy with the results, but if I were doing it over again I think I might have gone 50/50 prepay and mutual fund.

Prepays are not the best. I know MD is a F*"'d up mess to deal with. And what if you move/your kid does not want to attend an in-state school? Then it is not a good idea. Better to invest the money and have options.

Yeah, that's why we didn't do prepay. But we never moved and the first kid is applying to state schools.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Roth or regular investment account.
I will never understand why people can't take some chances with $15k-$20k in growth stock when kids are young. Same people have no problem putting $50k-$100k into some lousy fund offered by 529 and claim tax advantage. Then take out a little more than the put in when considering inflation. Why not put it in a mattress.

You're under selling 529s. The Virginia 529 offers a total stock market index fund with a 0.069 expense ratio. The tax deduction + tax free withdrawal readily beats using a brokerage account to buy VTI (with a 0.03 expense ratio).

This^^^. The Virginia American Funds 529 is one of the best out there, even if you don't live in VA. The investment choices are top notch and the fees are low. We used that for all of our kids and will continue with it for grandkids

A 529 you buy through a broker? When did that become a good idea?

I feel like we're dealing the realtors trying to pump up enthusiasm for bad houses in the Real Estate forum

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Roth or regular investment account.
I will never understand why people can't take some chances with $15k-$20k in growth stock when kids are young. Same people have no problem putting $50k-$100k into some lousy fund offered by 529 and claim tax advantage. Then take out a little more than the put in when considering inflation. Why not put it in a mattress.

You're under selling 529s. The Virginia 529 offers a total stock market index fund with a 0.069 expense ratio. The tax deduction + tax free withdrawal readily beats using a brokerage account to buy VTI (with a 0.03 expense ratio).

This^^^. The Virginia American Funds 529 is one of the best out there, even if you don't live in VA. The investment choices are top notch and the fees are low. We used that for all of our kids and will continue with it for grandkids

The investments aren't bad, but the MD 529 performance numbers (which are net of investment fees) crush the VA 529. For example, the Portfolio 2030: Maryland annualized 5 year return is 5.09%. VA annualized 5 year return is 3.68%. So if you are a MD resident, I completely disagree that "regardless of residence", VA is the way to go.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Roth or regular investment account.
I will never understand why people can't take some chances with $15k-$20k in growth stock when kids are young. Same people have no problem putting $50k-$100k into some lousy fund offered by 529 and claim tax advantage. Then take out a little more than the put in when considering inflation. Why not put it in a mattress.

You're under selling 529s. The Virginia 529 offers a total stock market index fund with a 0.069 expense ratio. The tax deduction + tax free withdrawal readily beats using a brokerage account to buy VTI (with a 0.03 expense ratio).

This^^^. The Virginia American Funds 529 is one of the best out there, even if you don't live in VA. The investment choices are top notch and the fees are low. We used that for all of our kids and will continue with it for grandkids

A 529 you buy through a broker? When did that become a good idea?

I feel like we're dealing the realtors trying to pump up enthusiasm for bad houses in the Real Estate forum

A "broker"? You purchase directly thru American Funds, just like I purchase TRowe and Vanguard directly thru them for my regular investments.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Roth or regular investment account.
I will never understand why people can't take some chances with $15k-$20k in growth stock when kids are young. Same people have no problem putting $50k-$100k into some lousy fund offered by 529 and claim tax advantage. Then take out a little more than the put in when considering inflation. Why not put it in a mattress.

You're under selling 529s. The Virginia 529 offers a total stock market index fund with a 0.069 expense ratio. The tax deduction + tax free withdrawal readily beats using a brokerage account to buy VTI (with a 0.03 expense ratio).

This^^^. The Virginia American Funds 529 is one of the best out there, even if you don't live in VA. The investment choices are top notch and the fees are low. We used that for all of our kids and will continue with it for grandkids

The investments aren't bad, but the MD 529 performance numbers (which are net of investment fees) crush the VA 529. For example, the Portfolio 2030: Maryland annualized 5 year return is 5.09%. VA annualized 5 year return is 3.68%. So if you are a MD resident, I completely disagree that "regardless of residence", VA is the way to go.

I'm not talking about "Portfolio Year 20XY". I'm discussing choices for selecting your own funds. 20+ years ago VA 529 was a much better choice. I'd never do the "manage for me by how long until college starts". Manage it yourself or go with SP500/total stock market index

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Our 529 offers a CD option. DS has 7 years until college and I've been using a target graduation date option but returns haven't been good mostly because bond funds have sucked instead of being a counter balance to stocks. I'm thinking of sticking half the money in a CD option and half in an S&P 500 index fund within the 529, then gradually shifting more of the money into CDs within the 529. Is this a bad idea?

When my DD was 7, I was fully in stocks. The account doubled by the time they were college age. For anyone who is saying they are underwhelmed by the results of their 529, you need to adjust your investment choices. The target age funds are too conservative in my view.

But I knew someone who lost 1/3 of her daughter's college savings due to market timing.

The year before my kid started college I moved the money to something more conservative than the 529 target year fund, so that I would not run the risk of losing any money. My preference....

Well obviously, the year before your kid starts college, 75% of it (or more) should be in lower risk investments.
In the same manner, one kid was 2 years from college at the 2016 election. We thought the market was going to tank afterwards, so for that kid we pulled 75-80% into lower risk. The kid who remained in added over $60K to their 529 in gains over the next 6 months.

Do we regret pulling it out---No, because it could have just as easily had a downturn and we needed that money for college in 2 years. The other kid didn't need it for 7 years, so they had time to weather a potential downturn.

Well check your state’s Target year fund mix. Mine was not conservative enough for me (one year before), so I moved it into the fund designed for kids already in college.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Our 529 offers a CD option. DS has 7 years until college and I've been using a target graduation date option but returns haven't been good mostly because bond funds have sucked instead of being a counter balance to stocks. I'm thinking of sticking half the money in a CD option and half in an S&P 500 index fund within the 529, then gradually shifting more of the money into CDs within the 529. Is this a bad idea?

When my DD was 7, I was fully in stocks. The account doubled by the time they were college age. For anyone who is saying they are underwhelmed by the results of their 529, you need to adjust your investment choices. The target age funds are too conservative in my view.

But I knew someone who lost 1/3 of her daughter's college savings due to market timing.

The year before my kid started college I moved the money to something more conservative than the 529 target year fund, so that I would not run the risk of losing any money. My preference....

Well obviously, the year before your kid starts college, 75% of it (or more) should be in lower risk investments.
In the same manner, one kid was 2 years from college at the 2016 election. We thought the market was going to tank afterwards, so for that kid we pulled 75-80% into lower risk. The kid who remained in added over $60K to their 529 in gains over the next 6 months.

Do we regret pulling it out---No, because it could have just as easily had a downturn and we needed that money for college in 2 years. The other kid didn't need it for 7 years, so they had time to weather a potential downturn.

Well check your state’s Target year fund mix. Mine was not conservative enough for me (one year before), so I moved it into the fund designed for kids already in college.

Have never used the Target year funds. Pick our own and adjust accordingly based on our desired risk as the kids get closer to college.