AA for a 3 year old and 5 year old for 529

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antiqueman
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AA for a 3 year old and 5 year old for 529

Post by antiqueman » Mon Sep 10, 2018 12:24 pm

I have two grandchildren.

One will be 3 soon and one will be 5 in about 7 months.


Looking to establish a 529 plan for them. Not sure about allocation of equity. I suppose the 5 year old has 15 to 16 years to final year of college. 3 year old has 17 18 years till final year.


I am considering 50% equity ( SP 500) and 50 fixed income.

Also I suppose I could put it all in Vanguards tips fund, but not sure if a TIPS fund keeps up with College Tuition inflation.

I know there is no certainty, but what is your best guess as to best allocation for these ages?

Thanks.

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wageoghe
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Re: AA for a 3 year old and 5 year old for 529

Post by wageoghe » Mon Sep 10, 2018 12:29 pm

How about target date funds just under when the money will be needed/used (to be a little on the conservative side)?

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greg24
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Re: AA for a 3 year old and 5 year old for 529

Post by greg24 » Mon Sep 10, 2018 12:30 pm

I would lean towards 80/20, but otherwise 60/40.

50/50 seems too conservative for money to be used in 15 years.

SlowlySaving
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Re: AA for a 3 year old and 5 year old for 529

Post by SlowlySaving » Mon Sep 10, 2018 12:51 pm

With that time horizon I would go 100% stocks, then as they get 3-5 years away from actually using it then start to move portions to more stable investment.

HEDGEFUNDIE
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Re: AA for a 3 year old and 5 year old for 529

Post by HEDGEFUNDIE » Mon Sep 10, 2018 12:56 pm

Not only 100% stocks, but 100% small cap until they hit high school, then 50/50.
Last edited by HEDGEFUNDIE on Mon Sep 10, 2018 1:11 pm, edited 1 time in total.

3funder
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Re: AA for a 3 year old and 5 year old for 529

Post by 3funder » Mon Sep 10, 2018 1:02 pm

Our son is three. We are 80/20 now.

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vineviz
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Re: AA for a 3 year old and 5 year old for 529

Post by vineviz » Mon Sep 10, 2018 1:07 pm

Virtually all 529 plans have age-specific investment options that will glide the asset allocation automatically as the child grows.

Vanguard's moderate risk portfolios would be 80/20 and 70/30 respectively for your children.

https://investor.vanguard.com/529-plan/ ... ed-options
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

keystone
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Re: AA for a 3 year old and 5 year old for 529

Post by keystone » Mon Sep 10, 2018 1:19 pm

I've been doing 60/40 for my 4 year old and will probably keep it that way until age 10 and then gradually shift more into bonds. I'm comfortable with this allocation but know there are good arguments for an 80/20 allocation at that age.

WhiteMaxima
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Re: AA for a 3 year old and 5 year old for 529

Post by WhiteMaxima » Mon Sep 10, 2018 1:22 pm

10 more years to invest. I guess there would be 1 or 2 bear and bull market. We are at bull tail now. So invest more conservatively. Let's say 50/50 equity/bond. Rebalance through next bear and you are good.

xenochrony
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Location: California

Re: AA for a 3 year old and 5 year old for 529

Post by xenochrony » Mon Sep 10, 2018 3:40 pm

My 9 year old's 529 is Vanguard agressive global equity offerred through Utah: 100% stock (70% USA / 30% non-USA). I'll probably start dialing risk down in a few years.

In contrast, my 17 year olds 529 is heavily weighted in fixed income / cash-like instruments. :happy

Grt2bOutdoors
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Re: AA for a 3 year old and 5 year old for 529

Post by Grt2bOutdoors » Mon Sep 10, 2018 5:09 pm

80/20 - years 0-6
70/30 - years 7-10
60/40 - years 11-13
40/60 - years 14-15
25/75 - years 16-17
10/90 - years 18+

Or something else based on your risk tolerances. 50/50 is too conservative when you have 9+ years to go before going “stabler”.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

letsgobobby
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Re: AA for a 3 year old and 5 year old for 529

Post by letsgobobby » Mon Sep 10, 2018 5:49 pm

100% stocks

veggivet
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Re: AA for a 3 year old and 5 year old for 529

Post by veggivet » Mon Sep 10, 2018 6:37 pm

With that time horizon, go 110% stocks if you can... :D

VA_Investor
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Re: AA for a 3 year old and 5 year old for 529

Post by VA_Investor » Mon Sep 10, 2018 7:16 pm

I like target date funds myself. You can put those on autopilot for the grandkids.

Also, look into if your state has a 529 plan that is eligible for state income tax deductions. We established 529 plans in Virginia (Invest529 plans) and first $4K per child per year is deductible for state income tax purposes.

antiqueman
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Re: AA for a 3 year old and 5 year old for 529

Post by antiqueman » Tue Sep 11, 2018 10:51 pm

Thank you to all who replied. Any additional comments are appreciated.

iamone
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Re: AA for a 3 year old and 5 year old for 529

Post by iamone » Wed Sep 12, 2018 9:25 am

We have 3 children: 16, 12, 10 in age. 529 for the 16 is 50/50 stocks / stable value. For 12 it is 100% stocks. For 10 it is 100% stocks. The 529 with conservative growth estimates can cover about 75% of the cost of college for my kids. In a pinch (i.e., if the stock market is not doing well) I can cash flow the cost of their education and we can transfer between kids or view the 529 as future investment for their post-grad or grand kids (as 529s are transferable). In my view, if the 529 is a good to have (but not must have) then you should be more aggressive. But if you think it is critical, going 80/20 now and rebalancing to 50/50 5 years before college is prudent.

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