Allocating child's 529 funds

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TNL
Posts: 296
Joined: Sat Jul 25, 2015 2:13 pm

Allocating child's 529 funds

Post by TNL » Thu Oct 12, 2017 2:07 pm

Hello -- I have a 529 plan for my child and I am thinking about moving the assets from their current allocation to an age-based portfolio.

Current Facts:
Child's age -- 10/5th grade
Expected Graduation Date: June 2025
Additional Facts: Child will likely serve a 2 year church mission and start in 2025 (immediately after HS graduation) or in 2026 after one year of college; during this time, no college expenses will be incurred and this is additional time for this money to grow.
Current 529 funds: $28,000
Expected college expenses in today's dollars: $92K, roughly. I intend to use this money to pay for 4 years of tuition and room/board at a public instate school and probably pay for each semester half of out this account and half out of cash flow. The current cost of tuition/room and board is approx. $23K in today's dollars (using the info from Flagship State U's own website). Child's abilities/aptitudes/interests already indicate that child will likely be accepted to Flagship State U or similar school (has about a 75% acceptance rate and child gets good grades and is smart but is not HPYS material).

Current allocation is Fidelity NH Index and NH Total Market -- expense ratio .11

I am thinking about moving this into the Fidelity NH Index 2027 portfolio (expense .13) or possibly even the 2030 as the glide path appears to move to cash pretty soon for 2025 and I am thinking I will have an extra 2 years to save while child is on mission. If child does not go on mission, no problem, doesn't set me back all that much.

Thoughts? Questions? Thank you for your help.

soccerrules
Posts: 117
Joined: Mon Nov 14, 2016 4:01 pm

Re: Allocating child's 529 funds

Post by soccerrules » Thu Oct 12, 2017 2:55 pm

so the goal is a 529 with $46K in 8-10 years. Not a small amount but also not a huge chunk of change. I would not over fund the 529 unless there are other children. Just save the difference in a taxable account. Some suggest to forgo the 529 all together, unless there are tax benefits for making yearly contributions.

I would put it in the fund that matches your desired AA for a time horizon of 10-12 years and keep the ER low. Most plans allow for you to make at least 2 changes each year, maybe more. You can see where things sit in 7-8 years and then decide it you want to adjust your AA then.

Remember you do not need all the money on day 1. You pay for it over 4 years and maybe longer if the student does a year of college a mission for 2 and then back to college for 3 more.

Good luck.
PS It might be worth having a heart to heart about going to college. If this is an only child and there are not others that would use the money you would pay a penalty to take the money out for non-educational purposes. I do believe most 529 plans allow for transfer of beneficiary to other qualified relatives too.
Don't let your outflow exceed your income or your upkeep will be your downfall.

rkhusky
Posts: 4302
Joined: Thu Aug 18, 2011 8:09 pm

Re: Allocating child's 529 funds

Post by rkhusky » Thu Oct 12, 2017 3:00 pm

Keep in mind that the stock market does go down. It is generally recommended that your investment should be mostly in cash and/or short term bond if it is planned to be used in a couple of years, i.e. at age 16-18.

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