529 underperforming. Where should we be saving for college?

[Anonymous]

Anonymous wrote:

Anonymous wrote:Everyone knows that the best 529s are VA and UT!

You only get the tax deduction if you participate in your in-state 529, right?

Correct.

I’ve been considering having two plans per kid - one in state and one through VA or UT (we are in MD currently and the investment options stink), just to get the tax deduction for MD and put any extra elsewhere.

[Anonymous]

Anonymous wrote:I just looked at our kids’ DC 529s. The balances aren’t all that high anyway because, until recently, we only earned enough to save about 150/month/kid. But we’ve been up to 400/kid for a couple of years now. Anyway, we’re down 7 percent for the year, and up only a little bit over 1 percent for the past five years! Yikes. That’s much lower than my 401k performance, so I’m wondering if we ought to be saving for them in some other way. (I did just learn about I-bonds here, and we have about 10k there dedicated to college.)

As is probably obvious from this, we aren’t high earners. We do make enough now that our kids can’t count on any kind of financial aid, though. We’ve been saving in their 529s since they were in preschool and, at 7th/9th grades, have about enough to pay for about a semester each. 🙄

Down 7 percent for the year isn't bad! The S&P 500 is down 16 percent for the year.

[Anonymous]

If a 529 is using a target fund - which many of them do - they get pretty conservative as your kid nears college age. The idea being that having a lot of bonds will reduce the risk of getting walloped by the stock marked when you’re close to starting tuition payments. However this has been an unusual year - the bond marked has been walloped along with stocks. Makes for some ugly 529 statements this year for the folks who thought their conservative accounts would hold up ok.

[Anonymous]

Anonymous wrote:If a 529 is using a target fund - which many of them do - they get pretty conservative as your kid nears college age. The idea being that having a lot of bonds will reduce the risk of getting walloped by the stock marked when you’re close to starting tuition payments. However this has been an unusual year - the bond marked has been walloped along with stocks. Makes for some ugly 529 statements this year for the folks who thought their conservative accounts would hold up ok.

Yup. I don’t use the target funds but allocate according to my personal risk level. Even my conservative accounts are down 8-10%.

[Anonymous]

For one thing, you need to investigate the fees. They look small. 0.12 percent for example. But that's actually very high. For the Maryland funds, the only one with a low fee is the Equity 500 portfolio (not the Equity Portfolio, which has a large fee). The target funds always have relatively high expense ratios. You don't have too much money in yet, but once you do, the fees take too big a chunk out. But of course, you need to know where to invest outside of that, which you would have to investigate.

[Anonymous]

Target funds didn’t do that great in va,dunno Dc. Look at the vanguard options for your state plan.