I’m not a money person, but I knew enough to sock away funds for college. The 529 balance is at an all time high. Yes, it’s mostly in age based options but this is one thing I might like off my mind - given it’s an election year, the market is volatile and the big dips stress me out … and my son is a senior. Anyone with more finance chops than I have that can offer advice? Do I sell everything and leave it in cash?
College senior or high school senior?
@BelknapPoint what is the penalty for withdrawing 529 funds and NOT using them for qualified educational expenses?
@Cardamom1023 if your student is a HS senior, I would use these 529 funds for what you intended…college qualified expenses.
None of us has a crystal ball regarding where the market will or won’t go (and please don’t discuss the impact of the election here as that is a political forum topic of discussion).
By the time our kids got to their respective HS senior years, I think that my wife and I shifted the 529 investments to mostly cash and/or income-generating bond funds.
We have used some leftover 529 funds – after our kids graduated from college – to make contributions to their respective Roth IRA funds; but that is nothing that we would have done while they were on the cusp of attending college.
2 Likes
Sorry, high school senior.
Oh gosh, I wouldn’t dream of injecting politics. Just generally election years are more volatile. Sorry to offend you, just looking for financial advice.
1 Like
Thank you, this is helpful and the kind of advice I was after.
3 Likes
Then I will stick with my initial suggestion. You have saved in this 529 to fund college. Leave it there and fund qualified educational expenses for your son for college. It’s what you planned to do.
But maybe @gandalf78 idea works too. I don’t think there is a right or wrong way here.
I think it depends on how much money you have, and how you plan to spend it for your student. During D24’s junior year, I moved it half to cash, which would have covered two years of the suggested budget I gave her. Yes, I gave up some up side, but there was some peace of mind associated with it. She ultimately chose the college with the best scholarship and lowest cost of attendance so as to save money for grad school, so it turns out we have enough in cash to cover all of undergrad. I’ll probably start transitioning more of that to cash in a year or two, unless it looks like we will hit a recession, which may accelerate that a bit.
1 Like
Can you sell Some of the investments and leave them in a cash account within the 529?
Perhaps I was unclear. I fully intend to keep it in the 529 and use it for educational purposes, but it’s currently invested in a bunch of funds, including some in index funds, and was seeking advice about whether to move the money out of potentially volatile investments rather than hope to earn another 6% or whatever. I think I got my answer, I appreciate the response.
5 Likes
Understood, this is how I’m leaning I just wanted confirmation and confidence I’m doing the right thing. Feeling risk adverse!
I just checked and it looks like my safest option may be “conservative income portfolio” or maybe the target enrollment portfolio (age based). I don’t see a cash option.
1 Like
If he’s a senior in an aged based portfolio expiring next year, it’s already likely been shifted to heavily fixed income. You want to look at the current selections. I’m personally a fixed income guy but not a fan of fixed income mutual funds because they fluctuate in value (but will go up when rates decline).
So you’re likely already protected.
But if you want out completely, check your options or call customer service.
There are likely money market options. Make a few percent next year and sleep well at night.
But given you’re a year out, unless you did like me - I had my 2019 grad in a 2027 fund because I wanted more risk - you’ll be fine.
If you have a 2025 fund, you can rest assure you’re likely fine.
Which company, state, and target year. We can look up for you.
3 Likes
Sometimes it might be called something like an FDIC option or Money Market option. They may also have a “stable value fund” option.
4 Likes
If the target date is next year, it’s likely already substantially in an income portfolio. But as a mutual fund, it may generate income but lose principal. But if it’s a money market, it will provide income and retain principal.
It’s the PA state 529 target year 2025. Not sure how to find out the company? Not home to check right now …. We’re given maybe 20 options and I only have 25% in the 2025 portfolio. The rest is spread out in other funds. Maybe I just move it all to 2025. Yep, admissions is stressing me out enough I don’t want to worry about the $$!
Thanks I’ll check for that.
They don’t show who they use - like NH uses Fidelity and Nevada Vanguard.
But they have a 100% interest accumulation portfolio. It’s all short term reserves.
The risk is not a year out but your student will be in school four years.
Unless you spend it all quickly, you would lose gains from years 2-4.
But yes it’s possible you are saved from losses that could happen as well.
Historically, it a bad bet on your part but the past can’t ensure the future and you do need to sleep at night.
So that’s the fund you want - Interest Accumulation Portfolio is what they call it.
1 Like
If the suggestions below don’t pan out, maybe it is possible to do a penalty-free transfer from one 529 plan to another one (different provider) that you like better? @BelknapPoint – is that true?
1 Like