Age-based College Savings Portfolio

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benway
Posts: 138
Joined: Thu Jun 30, 2011 5:17 pm

Age-based College Savings Portfolio

Post by benway »

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Last edited by benway on Mon Aug 01, 2022 8:00 am, edited 1 time in total.
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Sammy_M
Posts: 1935
Joined: Sun Nov 25, 2007 7:30 am

Re: Age-based College Savings Portfolio

Post by Sammy_M »

I think it depends on how willing you are to cover the short fall should equities take a downturn. If you're not looking to do that then you are right about it being prudent to shift more toward fixed income.

I think TFB did a nice job discussing the problem with age-based 529 plans in the linked blog post.
Last edited by Sammy_M on Sat Feb 11, 2012 11:16 am, edited 2 times in total.
Grt2bOutdoors
Posts: 25625
Joined: Thu Apr 05, 2007 8:20 pm
Location: New York

Re: Age-based College Savings Portfolio

Post by Grt2bOutdoors »

Your time horizon is roughly 7 years prior to termination of the tuition liability. Personally, I wouldn't be comfortable with any equity exposure at age 18. At this point, with 3.5 years to go, no more than 30%. There is no assurance that holding equities during college will provide enough to cover the remaining 2-3 years tuition and it may expose you to losses that you may not be able to recoup.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions
MariaT
Posts: 226
Joined: Mon Feb 19, 2007 8:34 pm

Re: Age-based College Savings Portfolio

Post by MariaT »

We have set up a 529 age-based account years ago with Vanguard. My daughter is off to college this coming Fall. Two years ago I followed Swensen's recommendation in his book of moving 2 year's worth of tuition to cash when your child is two years away from college. I kept the remainder 50 percent in Vanguard Income Aged-Based. My plan next year is to move 50 precent from Vanguard Income to cash and final transfer the following year. Since all our nephews and nieces are all college grads and we only have one child this plan works for us. It was important for us that the principal amount was preserved and we were willing to accept very dismal returns but the last few years have been a blessing.

Warm regards,
Maria
fx24
Posts: 54
Joined: Wed Dec 28, 2011 10:23 pm

Re: Age-based College Savings Portfolio

Post by fx24 »

Consider this problem with my age-based 529 college plan. Six years ago, I invested in the South Dakota plan, as it was well ranked at that time. I invested in their "Age-based portfolio" which has a 1.93% total annual fee (Collegeaccess529 Class C units). Per the plan summary, the fee averages $200 per $10,000 per year. While seemingly little, my initial contribution of $142,000 during the 6yrs (2006-11) generated fees of 14.2 x $200 x 6 yrs = $17,000. Within this, "the financial advisor recieves 1% ongoing trail commission from the Program Manager" that being $1420 x 6 yrs = $8,500. While these fees have certainity and are always paid; client performance has no similar certainity. I've swung from -25000 to +18000 and am currently up $8000.

My point is that $17,000 in fees is shameful considering they deter from college savings. It Just examplifies how financial firms really work. Buyer beware.
letsgobobby
Posts: 12073
Joined: Fri Sep 18, 2009 1:10 am

Re: Age-based College Savings Portfolio

Post by letsgobobby »

regardless of whether you use age-based portfolios, or what your particular asset allocation is, fees matter, as always. If you want a cheaper 529 plan, Utah http://www.uesp.org/ offers a variety of very low-cost options.
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