age-based funds in VA 529 program?

[Anonymous]

I guess they're not really age-based, but based on when you expect to use them. I have been investing in one for my daughter because it seemed easy and it looks like the program charges you for changing investments too often etc. I did notice that the expense ratio is kind of high. My daughter is only two should I just pick a fund with a lower expense ratio that's just more aggressive instead?

[Anonymous]

If she is two, I would propose a mix of 70-30 tilted toward equities and go for the lowest expense ratio possible.

[Anonymous]

Stick with the target date fund. You're paying the higher expense ratio now because they are actively managing it for you. It will rebalance automatically without you having to go in and change the allocation every couple of years.

Target date funds are terrific for 529s. They're not good in a retirement portfolio.

[Anonymous]

Also, if you went with the 2030 Fund, you're currently in a 90-10 so it'd be difficult to get too much more aggressive than that. Leave it alone.

[Anonymous]

I am a financial planner, manage our family's investments and I invested our kids' 529 plans in a target based fund. It is hard enough to remember to rebalance our family's portfolio on top of a full time job and taking care of two young kids. I think the target based fund is great!

Also I know some people got really hurt in 2008/2009 with 529 plans because their funds were too aggressively invested and they had either forgotten or not realized they needed to pull back on equities once their child was 15 or 16.

[Anonymous]

Anonymous wrote:Stick with the target date fund. You're paying the higher expense ratio now because they are actively managing it for you. It will rebalance automatically without you having to go in and change the allocation every couple of years.

Target date funds are terrific for 529s. They're not good in a retirement portfolio.

Can I press you on your last sentence? Why are they not good in a retirement portfolio? I've been asking dh to switch to the target date fund for his TSP account (federal workers' 401K plan). He has been reluctant without really explaining why.

[Anonymous]

We have done quite well with the VA target-based funds.

- signed mom of college and h.s. kids

[Anonymous]

OP here---thanks all. I will stick with the target-date-based fund. It's easier and I don't have to change anything.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Stick with the target date fund. You're paying the higher expense ratio now because they are actively managing it for you. It will rebalance automatically without you having to go in and change the allocation every couple of years.

Target date funds are terrific for 529s. They're not good in a retirement portfolio.

Can I press you on your last sentence? Why are they not good in a retirement portfolio? I've been asking dh to switch to the target date fund for his TSP account (federal workers' 401K plan). He has been reluctant without really explaining why.

Great question. When is your child going to college? 18 or 19, right?

Well, when are you going to retire? 62? 67? 72? 75? So, what happens if you plan for 62 and retire at 67? You miss out on the potential of a percentage of 5 years of growth. Look what has happened to our markets in the last 5 years. It was nice to have a piece of that, wouldn't you agree?

There is nothing so wrong with holding them in a retirement portfolio. I just won't recommend them to clients. If you're a novice investor, they're fine. You don't have to do a thing. However, if you are able to make moves or have someone to do it for you, then you shouldn't own them.