529 Asset Allocation Help

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
Topic Author
stockfox42
Posts: 6
Joined: Thu May 17, 2018 12:42 pm

529 Asset Allocation Help

Post by stockfox42 »

Reading through prior postings about the NY (Vanguard) 529 accounts, I was hoping to get some board advice about AA for my three accounts (for children 16/12/9).

Since inception, I've considered the 529 accounts separate from our family allocations, and have contributed to them on a monthly basis, 100% aggressive (75 total stock market and 25 total international market). They will be a part of future college financing, but not the sole source of income.

Recently, I have thought to maybe scale back the aggressive nature of the portfolios for the 16 and 12 year olds. Any suggestions as to AA apart from the portfolio advice offered on the 529 website? I think the 9 year old still has a long enough horizon that I can keep it 100% stock at this time, but can begin to shift contributions to a more balanced fund in the near future.

Also, instead of just changing future contribution allocations, is it just better to exchange the funds into a more conservative portfolio for the older ones (you are allowed to do that twice a year in NY)?

All suggestions would be greatly appreciated.
balbrec2
Posts: 368
Joined: Mon Nov 13, 2017 3:03 pm

Re: 529 Asset Allocation Help

Post by balbrec2 »

What percentage of the total funding do you anticipate the 529's being?
Generally speaking, any funds to be used within a five year or less time frame
should not be in the stock market. Like wise any funds to be used within a one to two year
time frame should be in cash or short term bonds. Again it depends on how much and how soon
you will depend on this source of funding. In the near term there are no guarantees beyond cash like
investments.
Topic Author
stockfox42
Posts: 6
Joined: Thu May 17, 2018 12:42 pm

Re: 529 Asset Allocation Help

Post by stockfox42 »

My goal would be to have the 529 account constitute 1/3 of the total cost of college, but even that is a high estimate (oldest child is looking at out-of-state colleges and Ivys).

No doubt a 100% stock allocation in the 529 is too risky at this point (graduation being over 2 years away).

Is the fund exchange the best way to go more conservative in her portfolio and maybe incorporate more bond holdings for the middle one (six years away)?
NoHeat
Posts: 308
Joined: Sun Sep 18, 2016 10:13 am

Re: 529 Asset Allocation Help

Post by NoHeat »

In my 529, I have held cash and bonds for college expenses within three years, and stocks for the years beyond. I chose three years because bear markets that long are uncommon, and in case it does happen I can pay for college with other funds. Once a child was three years from college I began gradually exchanging funds from stocks to bonds and cash.
Topic Author
stockfox42
Posts: 6
Joined: Thu May 17, 2018 12:42 pm

Re: 529 Asset Allocation Help

Post by stockfox42 »

NoHeat wrote: Tue Jun 05, 2018 10:12 am In my 529, I have held cash and bonds for college expenses within three years, and stocks for the years beyond. I chose three years because bear markets that long are uncommon, and in case it does happen I can pay for college with other funds. Once a child was three years from college I began gradually exchanging funds from stocks to bonds and cash.
I would tend towards doing something like this, especially since the 529 will not be used as the primary funding source for college.
User avatar
SmileyFace
Posts: 6066
Joined: Wed Feb 19, 2014 10:11 am

Re: 529 Asset Allocation Help

Post by SmileyFace »

For the 16 year old I would go 50/50 - shifting to all bonds/cash when they graduate high school. If you are planning to spend the money over a 4 year period you actually won't spend it all for another 6 years.
For the 12 year old I would probably be 70/30; shift to 50/50 when they hit 16 - then shift to all bonds/cash when they graduate high school.
BogleDan
Posts: 28
Joined: Sun Jun 03, 2018 5:49 pm

Re: 529 Asset Allocation Help

Post by BogleDan »

On the other hand, your youngest won't graduate for another 13 years. That's a pretty long time horizon. If you consider all three 529s one big "pot" (which they are, since changing the beneficiary from one child to the other is simple and free), it might make sense to stay aggressive with all the money.
Topic Author
stockfox42
Posts: 6
Joined: Thu May 17, 2018 12:42 pm

Re: 529 Asset Allocation Help

Post by stockfox42 »

I'm starting to sense that the AA for 529 accounts is not a cut-and-dry issue. It's just hard to look at some of the AAs offered on the NY529 webpage (which shuffles you over to the Vanguard site) and say that any of the options is just right for you based upon age of the child. Number of kids, asset pools, and other factors will have to come into play...
NoHeat
Posts: 308
Joined: Sun Sep 18, 2016 10:13 am

Re: 529 Asset Allocation Help

Post by NoHeat »

BogleDan wrote: Tue Jun 05, 2018 12:50 pm If you consider all three 529s one big "pot" (which they are, since changing the beneficiary from one child to the other is simple and free), ..
Except for gift taxes, perhaps

https://www.irs.gov/pub/irs-pdf/i709.pdf
megabad
Posts: 3146
Joined: Fri Jun 01, 2018 4:00 pm

Re: 529 Asset Allocation Help

Post by megabad »

I would just dump it all into age based now. I think the NYSaves/Vanguard aggressive age based is pretty decent myself, but even that will have you almost all bonds at this time frame. That way you don't have to worry about it anymore though.

https://www.nysaves.org/home/which-inve ... tions.html
BogleDan
Posts: 28
Joined: Sun Jun 03, 2018 5:49 pm

Re: 529 Asset Allocation Help

Post by BogleDan »

NoHeat wrote: Tue Jun 05, 2018 6:11 pm
BogleDan wrote: Tue Jun 05, 2018 12:50 pm If you consider all three 529s one big "pot" (which they are, since changing the beneficiary from one child to the other is simple and free), ..
Except for gift taxes, perhaps

https://www.irs.gov/pub/irs-pdf/i709.pdf
This is interesting to me, because 529s are still considered strictly to be under the parents' control and the parents' money. Why is it then that they are considered gifts for tax purposes?
Post Reply