529 in S&P fund, child senior in HS

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novillero
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529 in S&P fund, child senior in HS

Post by novillero »

The fund says it is up 26.46% this year! Next year is the first college tuition payment. I may have enough for 3 years, depending on the school.

I am thinking of taking it all and transferring it to something extremely safe. I don’t trust the immediate future.

Im in Franklin Templeton’s “NJ’s Best”... is it time to go safer?
lakpr
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Re: 529 in S&P fund, child senior in HS

Post by lakpr »

This is money you need within the next 1 year, so yes, move it to something like money market or short term treasuries.
rkhusky
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Re: 529 in S&P fund, child senior in HS

Post by rkhusky »

You got lucky. How would you feel if the fund dropped by 50%? Would it affect your child's college plans?
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JoeRetire
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Re: 529 in S&P fund, child senior in HS

Post by JoeRetire »

novillero wrote: Wed Nov 20, 2019 5:43 am I am thinking of taking it all and transferring it to something extremely safe. I don’t trust the immediate future.
That makes complete sense to me.
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mike_in_ny
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Re: 529 in S&P fund, child senior in HS

Post by mike_in_ny »

"When you've won the game, stop playing."

I'd take the money off the table.
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RickBoglehead
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Re: 529 in S&P fund, child senior in HS

Post by RickBoglehead »

novillero wrote: Wed Nov 20, 2019 5:43 am The fund says it is up 26.46% this year! Next year is the first college tuition payment. I may have enough for 3 years, depending on the school.

I am thinking of taking it all and transferring it to something extremely safe. I don’t trust the immediate future.

Im in Franklin Templeton’s “NJ’s Best”... is it time to go safer?
Just to be clear. Your 529 in New Jersey's which is run by Franklin Templeton. That is the 529 ACCOUNT.

The investment you've chosen is apparently the S&P 500 Index 529 Portfolio? If so, with one year to school, yes, being 100% invested in the stock market is probably too aggressive, and was likely so much sooner than a year before college. Shifting to the Franklin U.S. Government Money 529 Portfolio, or that combined with the Conservative age based portfolio, would make more sense.
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goodenyou
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Re: 529 in S&P fund, child senior in HS

Post by goodenyou »

I put it in FDIC. Utah 529 Plan here. I have zero regret that I may have missed some gains over the past year or two. The potential upside is not worth the risk in the short term. Your rapid withdrawal will decimate your ability to recover from a potential bad sequence of returns in the very short term.
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BlueCable
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Re: 529 in S&P fund, child senior in HS

Post by BlueCable »

As another poster mentioned, you got lucky and should have reduced your stock exposure years ago.

I use 0% stock for money needed in the next three years because there's no time to recover from market declines.

Short term bonds or money market are your best choices.
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Brianmcg321
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Re: 529 in S&P fund, child senior in HS

Post by Brianmcg321 »

You've got to know when to hold 'em
Know when to fold 'em
Know when to walk away
And know when to run
You never count your money
When you're sittin' at the table
There'll be time enough for countin'
When the dealin's done

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Stinky
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Re: 529 in S&P fund, child senior in HS

Post by Stinky »

You've won the game. Time to downshift on the risk meter.

I suggest that you move most all of the money to a much less volatile investment, like a money market fund.
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DarkHelmetII
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Re: 529 in S&P fund, child senior in HS

Post by DarkHelmetII »

You've gotten lucky IMHO. Move 75% to intermediate term treasuries if not more.
delamer
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Re: 529 in S&P fund, child senior in HS

Post by delamer »

BlueCable wrote: Wed Nov 20, 2019 8:15 am As another poster mentioned, you got lucky and should have reduced your stock exposure years ago.

I use 0% stock for money needed in the next three years because there's no time to recover from market declines.

Short term bonds or money market are your best choices.
Absolutely.
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1789
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Re: 529 in S&P fund, child senior in HS

Post by 1789 »

Don't take unnecessary risk, you may not got lucky next time.
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WhiteMaxima
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Re: 529 in S&P fund, child senior in HS

Post by WhiteMaxima »

Too risky. Move 50% into FDIC insured fund. rest in a diversified index.
xenochrony
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Re: 529 in S&P fund, child senior in HS

Post by xenochrony »

I agree with the above posters that you need to de-risk immiadately, and that you got lucky with such an equity rich 529 account to date.

That said, I'm not certain moving it all to 100% FDIC (or other principal preservation) investments is the ideal path forward.

For reference, my daughter is currently 17, and our first college payment is due in 10 months. That said I have a Utah 529 account for her, using the age-based aggressive global portfolio, which, as of today is 30% global equity, 40% fixed income, and 30% principal preservation. In two weeks, when she turns 18 years old, that will rebalance to 20% equity, 40% fixed income, and 40% principal preservation. I'm OK with a 20% equity allocation as she intends to be in college for 4 years. We also have another younger daughter where we could potentially transfer depressed equity investments from this 529 account to, should that happen.

Importantly, this 529 account was originally meant to fund a majority of college expenses; the remainder would be paid for ideally with non-need based academic scholarships, and cash-flow from my income. The twist, as we learned today, is that she has received a NCAA DIV I grant-in-aid that will pay for a majority of her total education costs. While the future is never guaranteed, this new variable makes me feel like I am able to take on some risk in the 529 (e.g. 20% equities).
bltn
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Re: 529 in S&P fund, child senior in HS

Post by bltn »

I would take it out of the stock market and split it 50/50 between a money market account and higher yielding cd s. Then I would save for the last year and have my son work summer jobs to contribute to his education fund.
leehamster
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Re: 529 in S&P fund, child senior in HS

Post by leehamster »

You've got your advice here. Get out of S&P now.

Vanguard offers age-based mixes of stock, bond and money market funds for 529 participants, depending on the age of the beneficiary. They are instructive.

https://investor.vanguard.com/529-plan/ ... ed-options
shess
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Re: 529 in S&P fund, child senior in HS

Post by shess »

novillero wrote: Wed Nov 20, 2019 5:43 am The fund says it is up 26.46% this year! Next year is the first college tuition payment. I may have enough for 3 years, depending on the school.

I am thinking of taking it all and transferring it to something extremely safe. I don’t trust the immediate future.
I just started a kid in college, and realized I made a mistake with our 529 plan. I was thinking in terms of "This is money for college, and it's tax-advantaged, so I should consider it part of our fixed-income portfolio". So far, so good. What I hadn't thought through, though, is that 529 plans are more like Roth IRAs than IRAs - there's value to maximizing the final result. Of course, if this is your sole source of educational funds, there's a lot of risk to trying to capture that value. But, in our case, the 529 was just one part of what we considered to available for college expenses, so it would have made sense to try to keep those gains in the 529 plan rather than in our taxable account.

As others have mentioned, I think the decision should be based on what a stock-market-style plunge in value would do to your student's college plans. If it would greatly change the plans, go conservative, since there's a ton of value to having a stable school situation. But if you'd just fill in the gaps from a taxable account, maybe not.

If you're not managing your portfolio as a single portfolio distributed across multiple accounts, then almost certainly you should go conservative and stop freestyling it!
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Michael Patrick
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Re: 529 in S&P fund, child senior in HS

Post by Michael Patrick »

My daughter is also a senior this year. I had the vast majority of her 529 in a stock fund. I made a pretty darn good return over the last number of years, but when the market started with the wild gyrations earlier this year I transferred it all into a stable value principal-plus-interest fund.
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