529 help please

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Hillview
Posts: 314
Joined: Fri Feb 02, 2018 7:27 am

529 help please

Post by Hillview » Tue Mar 13, 2018 6:57 pm

We have 2 kids ages 10 and 12. We want them to be able to go wherever they want to go (don't judge). Years ago we invested in American Funds with Northwest Mutual. We now have four 529 plans as follows:
Son 1 American Funds: $144,989 American Funds College 2024 Fund (CFTAX) (ER:0.73%)
Son 1 Vanguard: $75,769 Vanguard 40% Stock/60% Bond Portfolio (ER: 0.16%)
TOTAL: $220,758

Son 2 American Funds: $144,690 American Funds College 2027 Fund (CSTAX) (ER: 0.80%)
Son 2 Vanguard: $65,784 Vanguard Moderate Growth Portfolio 50% Stock/ 50% Bond (ER: 0.16%)
TOTAL: $210,474

1) Should I pull the money out of American Funds (yes we stupidly paid the front load, we were young and stupid) and put it into Vanguard? This seems like a no brainer given the ERs? Am I missing something?

2) I could use some asset allocation guidance. For this investment (vs our retirement) we are more conservative as we have quite a lot in there and while we need some growth we would be unhappy with a sharp decline (for context our retirement is 75/25).

Thank you!

JBTX
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Re: 529 help please

Post by JBTX » Tue Mar 13, 2018 9:02 pm

Sure you can move them to vanguard and it may make sense to do so. I’d check to make sure there aren’t any sort of significant transfer or other fees.

Are those the only fees or is there an additional adminstration or management fee? Look in the fine print of your plan.

I will so those fees aren’t absolutely horrible and your vanguard fees are pretty competitive. If you choose to stay for whatever reason, perhaps put most of all in the vanguard funds, if that is an option.

As to asset allocation, I would say somewhere between 33% and 50% equities for a 10-12 year old, depending on your risk tolerance, and decreasing 1-1.5% each year.

Hillview
Posts: 314
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Re: 529 help please

Post by Hillview » Wed Mar 14, 2018 6:54 am

JBTX wrote:
Tue Mar 13, 2018 9:02 pm
Sure you can move them to vanguard and it may make sense to do so. I’d check to make sure there aren’t any sort of significant transfer or other fees.

Are those the only fees or is there an additional adminstration or management fee? Look in the fine print of your plan.

I will so those fees aren’t absolutely horrible and your vanguard fees are pretty competitive. If you choose to stay for whatever reason, perhaps put most of all in the vanguard funds, if that is an option.

As to asset allocation, I would say somewhere between 33% and 50% equities for a 10-12 year old, depending on your risk tolerance, and decreasing 1-1.5% each year.
Ooof thanks JBTX. I looked for any additonal fees and YUP they are there.
Fees:
Annual Management Fees 0.00%
Other Expenses 0.21%
Service 12b-1 0.24%
Expense Ratio CSTAX 1 0.80%

So that means for this one fund the expenses are: 1.25%?

Sounds like the Vanguard 40 stock / 60 bonds is a good AA.
Thanks!

letsgobobby
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Re: 529 help please

Post by letsgobobby » Wed Mar 14, 2018 8:36 am

I think 20-40% stocks is very conservative for a 10-12 year old. We remain 100% stocks for our kids of a similar age and similar 529 values. Will probably go to 75% stocks about age 14 and no less than 50% by college. Remember some of this money may eventually go to graduate school which could easily take the time horizon out to age 25-30.

Hillview
Posts: 314
Joined: Fri Feb 02, 2018 7:27 am

Re: 529 help please

Post by Hillview » Wed Mar 14, 2018 2:33 pm

letsgobobby wrote:
Wed Mar 14, 2018 8:36 am
I think 20-40% stocks is very conservative for a 10-12 year old. We remain 100% stocks for our kids of a similar age and similar 529 values. Will probably go to 75% stocks about age 14 and no less than 50% by college. Remember some of this money may eventually go to graduate school which could easily take the time horizon out to age 25-30.
Thanks for your reply. This is where I really struggle as I have no idea where they would go to school for under graduate and what that would cost (I've looked up a load of schools and they are all over the map).

kotsp
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Re: 529 help please

Post by kotsp » Wed Mar 14, 2018 2:49 pm

Hillview wrote:
Tue Mar 13, 2018 6:57 pm

2) I could use some asset allocation guidance. For this investment (vs our retirement) we are more conservative as we have quite a lot in there and while we need some growth we would be unhappy with a sharp decline (for context our retirement is 75/25).

Thank you!
Vanguard has age based options and they are good as far as automatically adjust AA based on as kids gets older. Refer https://investor.vanguard.com/529-plan/ ... ed-options

For 12 year kid, even by going via aggressive portfolio, they have it 60% Stock and 40% bonds. For the 10 year old kid, they have it 70-30. As you can see all these age based portfolio is 4 fund portfolio.

Of course, if you do not like these age based ones, you can always go with individual portfolio https://investor.vanguard.com/529-plan/ ... nd-returns

Hope this helps.

letsgobobby
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Re: 529 help please

Post by letsgobobby » Wed Mar 14, 2018 6:37 pm

Hillview wrote:
Wed Mar 14, 2018 2:33 pm
letsgobobby wrote:
Wed Mar 14, 2018 8:36 am
I think 20-40% stocks is very conservative for a 10-12 year old. We remain 100% stocks for our kids of a similar age and similar 529 values. Will probably go to 75% stocks about age 14 and no less than 50% by college. Remember some of this money may eventually go to graduate school which could easily take the time horizon out to age 25-30.
Thanks for your reply. This is where I really struggle as I have no idea where they would go to school for under graduate and what that would cost (I've looked up a load of schools and they are all over the map).
Consider also that most folks who can accumulate almost half a million dollars in 529s within a dozen years have the means to make up for any late inning losses with other savings, cash flow, etc.

Hillview
Posts: 314
Joined: Fri Feb 02, 2018 7:27 am

Re: 529 help please

Post by Hillview » Wed Mar 14, 2018 7:12 pm

letsgobobby wrote:
Wed Mar 14, 2018 6:37 pm
Hillview wrote:
Wed Mar 14, 2018 2:33 pm
letsgobobby wrote:
Wed Mar 14, 2018 8:36 am
I think 20-40% stocks is very conservative for a 10-12 year old. We remain 100% stocks for our kids of a similar age and similar 529 values. Will probably go to 75% stocks about age 14 and no less than 50% by college. Remember some of this money may eventually go to graduate school which could easily take the time horizon out to age 25-30.
Thanks for your reply. This is where I really struggle as I have no idea where they would go to school for under graduate and what that would cost (I've looked up a load of schools and they are all over the map).
Consider also that most folks who can accumulate almost half a million dollars in 529s within a dozen years have the means to make up for any late inning losses with other savings, cash flow, etc.
Well this is true but for us we'd like to retire during the time the kids are in college so being done with college $$ (undergrad) would be great.

Grt2bOutdoors
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Joined: Thu Apr 05, 2007 8:20 pm
Location: New York

Re: 529 help please

Post by Grt2bOutdoors » Wed Mar 14, 2018 7:40 pm

Hillview wrote:
Wed Mar 14, 2018 7:12 pm
letsgobobby wrote:
Wed Mar 14, 2018 6:37 pm
Hillview wrote:
Wed Mar 14, 2018 2:33 pm
letsgobobby wrote:
Wed Mar 14, 2018 8:36 am
I think 20-40% stocks is very conservative for a 10-12 year old. We remain 100% stocks for our kids of a similar age and similar 529 values. Will probably go to 75% stocks about age 14 and no less than 50% by college. Remember some of this money may eventually go to graduate school which could easily take the time horizon out to age 25-30.
Thanks for your reply. This is where I really struggle as I have no idea where they would go to school for under graduate and what that would cost (I've looked up a load of schools and they are all over the map).
Consider also that most folks who can accumulate almost half a million dollars in 529s within a dozen years have the means to make up for any late inning losses with other savings, cash flow, etc.
Well this is true but for us we'd like to retire during the time the kids are in college so being done with college $$ (undergrad) would be great.
For asset allocation- take a look at the Vanguard plan or the my529.org plan (Utah plan). Select an asset allocation that lets you sleep at night, since you plan on being retired by time kids hit school you want to be holding no more than 20% equity. While letsgobobby is equity heavy he also holds a fully prepaid undergrad plan with state of Washington - so not exactly apples to apples but a prepaid plan guaranteed by a state government to me is like a bond that says “I promise to pay something”, a 529 plan says “what you have in there is what you have” as many found out in 2008-2009. Things to bear in mind.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

letsgobobby
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Joined: Fri Sep 18, 2009 1:10 am

Re: 529 help please

Post by letsgobobby » Wed Mar 14, 2018 8:29 pm

I actually no longer have that. In 2015 I exchanged it for a traditional 529 so I am truly 100% equities across all plans.

I am thinking of buying another twelve years of prepaid tuition though!

Grt2bOutdoors
Posts: 19477
Joined: Thu Apr 05, 2007 8:20 pm
Location: New York

Re: 529 help please

Post by Grt2bOutdoors » Thu Mar 15, 2018 6:24 am

letsgobobby wrote:
Wed Mar 14, 2018 8:29 pm
I actually no longer have that. In 2015 I exchanged it for a traditional 529 so I am truly 100% equities across all plans.

I am thinking of buying another twelve years of prepaid tuition though!
So, if you do buy the prepaid plan you are diversifying into fixed income even though your kids are not close to school years yet.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

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dogagility
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Re: 529 help please

Post by dogagility » Thu Mar 15, 2018 9:14 am

Hillview wrote:
Wed Mar 14, 2018 2:33 pm
Thanks for your reply. This is where I really struggle as I have no idea where they would go to school for under graduate and what that would cost (I've looked up a load of schools and they are all over the map).
The cost of colleges can be estimated by using their Net Price Calculators available on each college's website. Suggest doing if you haven't already.

You'll find following costs/year including room and board for directional publics, flagship publics, middling privates, and tippy top privates: 10-20K, 25-35K, 25-40K, and 45-65K. Inflate this number by 3-5%/year.

All of these numbers will be influenced by factors that are unknowable but can be estimated. Perhaps the biggest is your current income when the kids are in college and their GPA and standardized test scores. Just take your best guess taking into consideration that academic achievements so far.

:sharebeer
Taking "risk" since 1995.

Hillview
Posts: 314
Joined: Fri Feb 02, 2018 7:27 am

Re: 529 help please

Post by Hillview » Thu Mar 15, 2018 9:16 am

dogagility wrote:
Thu Mar 15, 2018 9:14 am
Hillview wrote:
Wed Mar 14, 2018 2:33 pm
Thanks for your reply. This is where I really struggle as I have no idea where they would go to school for under graduate and what that would cost (I've looked up a load of schools and they are all over the map).
The cost of colleges can be estimated by using their Net Price Calculators available on each college's website. Suggest doing if you haven't already.

You'll find following costs/year including room and board for directional publics, flagship publics, middling privates, and tippy top privates: 10-20K, 25-35K, 25-40K, and 45-65K. Inflate this number by 3-5%/year.

All of these numbers will be influenced by factors that are unknowable but can be estimated. Perhaps the biggest is your current income when the kids are in college and their GPA and standardized test scores. Just take your best guess taking into consideration that academic achievements so far.

:sharebeer
Thanks -- all my calculations are based on 68k a year school.

letsgobobby
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Joined: Fri Sep 18, 2009 1:10 am

Re: 529 help please

Post by letsgobobby » Thu Mar 15, 2018 11:01 am

Grt2bOutdoors wrote:
Thu Mar 15, 2018 6:24 am
letsgobobby wrote:
Wed Mar 14, 2018 8:29 pm
I actually no longer have that. In 2015 I exchanged it for a traditional 529 so I am truly 100% equities across all plans.

I am thinking of buying another twelve years of prepaid tuition though!
So, if you do buy the prepaid plan you are diversifying into fixed income even though your kids are not close to school years yet.
Good point. I haven't decided yet, but I rationalize by saying I'll be using new money. Same difference though.

Grt2bOutdoors
Posts: 19477
Joined: Thu Apr 05, 2007 8:20 pm
Location: New York

Re: 529 help please

Post by Grt2bOutdoors » Thu Mar 15, 2018 12:17 pm

Hillview wrote:
Thu Mar 15, 2018 9:16 am
dogagility wrote:
Thu Mar 15, 2018 9:14 am
Hillview wrote:
Wed Mar 14, 2018 2:33 pm
Thanks for your reply. This is where I really struggle as I have no idea where they would go to school for under graduate and what that would cost (I've looked up a load of schools and they are all over the map).
The cost of colleges can be estimated by using their Net Price Calculators available on each college's website. Suggest doing if you haven't already.

You'll find following costs/year including room and board for directional publics, flagship publics, middling privates, and tippy top privates: 10-20K, 25-35K, 25-40K, and 45-65K. Inflate this number by 3-5%/year.

All of these numbers will be influenced by factors that are unknowable but can be estimated. Perhaps the biggest is your current income when the kids are in college and their GPA and standardized test scores. Just take your best guess taking into consideration that academic achievements so far.

:sharebeer
Thanks -- all my calculations are based on 68k a year school.
You may want to adjust your calculations, the price tags are up to $75K for many of the Northeast second tier schools (BU, Boston College, NE, mid Atlantic/MA corridor type schools), the Ivy's are either there or not too much further behind.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

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