Reply to Parents of little kids: What are your college savings goals?

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[quote=Anonymous]One wildcard that no one has mentioned here is the superior returns from equities in recent years.  Many 529 contributors have benefitted from the strong market, and may be further ahead on reaching their contribution goals than they may have expected when deciding how much to save each month.

Conversely, some 529 contributors with very young kids might have additional worries that we are due for a reversion to the mean, and returns in upcoming years may be lower or even negative for some period of time.

Has anyone changed their 529 asset allocation based on recent returns, or expected returns?  I have a freshman and sixth grader, and I have hit my goals (funding likely cost (including expected inflation) for an in-state flagship school) for them as they enter college.  But I still haven't shifted out of equity, or even out of international equity, towards more bonds or cash, as I wouldn't mind having some funds available for grad school if possible.

FWIW, I tend to favor more risk in investments generally, but still via broad, low-cost/passively-managed funds and ETF, not individual stocks.  In particular, I think the asset allocation in the automatically-adjusting funds offered in the VA 529 plan (much like the L-funds in the TSP), shift too heavily towards bonds and cash too early during the lifespan of the student (or employee).

My appetite for risk may be driven by the FERS pension I have been accumulating, or the access to other funding buckets beyond the 529 in general.  To me, it's been helpful to think of the pension as filling up the fixed-income portion of the retirement portfolio instead of bonds or cash.  Having a high-income, and ability to cash flow college expenses, may also have a similar effect.  YMMV
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