Change 529 AA?

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hbdad
Posts: 108
Joined: Fri Dec 13, 2019 3:29 pm

Change 529 AA?

Post by hbdad »

Hi all,

I am currently 100% equity in Utah 529. My kids are 6 and 8. My balance dropped quite a bit during this hiccup but i did not panic and have recovered everything. The balance for my 8 year old is about 41k. My goal is to have somewhere around 70-80k in there when college starts. My thought had been to be 100% equity until I get to that amount and then dial back and stop contributing. But now with markets recovered, I'm wondering if this is a good opportunity to reconsider my AA and go with either an aggressive, moderate, or even conservative age based option. Thanks.
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dogagility
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Re: Change 529 AA?

Post by dogagility »

hbdad wrote: Sun Jun 07, 2020 8:54 pm I am currently 100% equity in Utah 529. My kids are 6 and 8. My balance dropped quite a bit during this hiccup but i did not panic and have recovered everything. The balance for my 8 year old is about 41k. My goal is to have somewhere around 70-80k in there when college starts. My thought had been to be 100% equity until I get to that amount and then dial back and stop contributing. But now with markets recovered, I'm wondering if this is a good opportunity to reconsider my AA and go with either an aggressive, moderate, or even conservative age based option. Thanks.
Hi, For a touch point, here's Vanguard's 529 age-based options: https://investor.vanguard.com/college-s ... ed-options. It seems you have the psychology to be aggressive in your investments (you did not panic sell). To reach your number without putting in additional money, I think you will need to follow the aggressive age-based plan.
All children spill milk. Learn to smile and wipe it up. -- A Farmer's Wife
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windaar
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Re: Change 529 AA?

Post by windaar »

Personally couldn't imagine doing 100% Equities for a 10 year horizon. I'd stick with an age-based option so you let the glide path do the thinking for you. Even the aggressive age-based plan will not be at 100% equities for an 8 year old. Good luck!
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Rudedog
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Joined: Wed Aug 01, 2018 3:15 pm

Re: Change 529 AA?

Post by Rudedog »

Currently at 100% equities (Vanguard S & P 500) for my grandson's Illinois 529 plan. He is one year old. I'll probably switch to a balanced fund when he's 8 years old, with ten years until college.
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KingRiggs
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Re: Change 529 AA?

Post by KingRiggs »

The answer depends to some degree on your ability/willingness to either cash-flow college tuition or have the kids take on student loans.

If you have the capacity to cash-flow a decent percentage of the college costs, you could opt to remain more aggressive with the AA in hopes that growth will fill in the gap.

If the thought of losing 50% of the value of the 529 fills you with anxiety, then it's time to ratchet back the risk profile in your 529.
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vineviz
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Re: Change 529 AA?

Post by vineviz »

hbdad wrote: Sun Jun 07, 2020 8:54 pm I am currently 100% equity in Utah 529. My kids are 6 and 8. My balance dropped quite a bit during this hiccup but i did not panic and have recovered everything. The balance for my 8 year old is about 41k. My goal is to have somewhere around 70-80k in there when college starts. My thought had been to be 100% equity until I get to that amount and then dial back and stop contributing. But now with markets recovered, I'm wondering if this is a good opportunity to reconsider my AA and go with either an aggressive, moderate, or even conservative age based option. Thanks.
I think an "aggressive" age-based is very reasonable: investing for education expenses entails a LOT of sequence of returns risk, so the glide path is really your friend here.

A typical equity allocation for 6 to 8-year old participants is about 80% even under the "aggressive" glide path in most plans.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch
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