College Savings 529 losing value - what to do?

[Anonymous]

I'm just so sick about this. We barely have anything saved for our kids college fund and every bit of the money I contributed last year (only about $500) is gone due to bad investments. I'm clueless about this sort of thing. Anyone care to commiserate? Suggestions? Help!

[Anonymous]

How old are your kids? If they aren't going to college anytime soon, leave the money there and then put some more in.

We just put another 10K in the 529s last week. You're buying shares that will increase in value over the long-term.

If your kids are going in a few years...talk to a financial advisor before doing anything.

[Anonymous]

Yeah, age of child means everything here. If they are 16, that's going to hurt. If they are 2, then you don't have to worry at all.

[Anonymous]

OP here - they are 6 & 8.

[Anonymous]

13:40 again. Don't think the money is "gone due to bad investments".

The market has sunk. The investments may have been wonderful, but the sellers on Wall Street have hit the panic button and sell whether it makes sense or not. Stay calm. Everything has decreased tremendously, but that doesn't necessarily mean that the value has gone down. THe market will stabilize, we just don't know how long that will take.

[Anonymous]

OP again - to the 13:40 poster - thanks for putting it in perspective. But in the meantime - do I continue to contribute? Or am I better off putting money I planned on contributing (money my daughter received for her birthday, for example) into CD's or Bonds or a regular savings account?

[Anonymous]

Absolutely keep investing.

It's called dollar cost averaging:

http://en.wikipedia.org/wiki/Dollar_cost_averaging

[Anonymous]

13:40 here. I am NOT a financial advisor, so keep that in mind. My kids are younger (2 and 4) and my advisor told me to keep putting in.

You have 9-10 years before your oldest needs that money, and I personally think the market will be doing well in that time frame (or we're all screwed!)

A 529 has a ton of tax advantages. You get to take deductions on that money when you put it in and there are tax advantages when you take it out as well. You simply do not get those advantages in a non-529 setting. In your savings account, the money will keep up with inflation, nothing more.

If you're risk-averse, call the 529 plan and ask if there are CDs or Bonds you can invest in within the 529. They usually recommend going with the investment that changes risk based on how many years out your kids are for college. But you are probably able to tailor that if you want. Overall, it makes sense to talk to the investors at the 529. IF they are still putting 8 yos' money into higher risk investments, it is probably the "right" thing to do, by the books. There are zero guarantees, but safer isn't always better.

[Anonymous]

The PP is right--the whole market has tanked; not even brilliant investors have been able to keep their money safe.

I'd keep putting money in. The best way is with a small contribution each month--that way your market risk is spread across the year.

[Anonymous]

OP, I am in the same boat. DD is 6. Just hold on...you'll be ok by the time they hit college age...keep contributing, stay calm, and ride it out.

[Anonymous]

don't be shocked when the dow hits 3000.

[Anonymous]

Anonymous wrote:OP, I am in the same boat. DD is 6. Just hold on...you'll be ok by the time they hit college age...keep contributing, stay calm, and ride it out.

You know, I think this is a perfectly reasonable approach, but it would be more honest to say that none of us has any idea, and while our economy has weathered similar challenges in this past and we think it will ultimately do the same here, there's no real way of knowing if it will take 2 years, 5 years, or 10 years or more. The stock market could certainly go down more, and it could certainly recover in 10 years, but everyone's got to make their own decision based on the relative risks of inflation, the stock market, etc. If there's one thing we all should know by now is that we can't have complete faith in the stock market-- and I say that as someone who has about 80% of my 401k in the stock market.

[Anonymous]

It is so frusterating isn't it?

But now is the right time to invest. Buy low.

But I know, even that rationally I know it is right, it kills me seeing that we lost $3000. I could have really used that money.

We've actually set up a monthly automatic deposit. It's not less scary, but at least you don't have to think about it and get that "am I doing the right thing" feeling each time you deposit money.