Investments in 529 college savings plans seem to be declining as people worry about stock market losses.
This is a dumb move. Why you would contribute funds when the Dow was at 14,000 and not when it’s at 9,000 is beyond me.
But you need to be smart about it. If your kid is going to college in less than 5 years, most of your money should be in low risk investment options. Most 529 plans offer age-based plans that keep more of your money in less risky options such as bonds when your child gets closer to college.
Also keep in mind that your kid will be in college for about 4 years. So if your kid starts college in 5 years, the average time you have to keep your money in your 529 plan is another 7 years. 7 years is a long time in the stock market. After all, the stock market is currently at 5 year lows. It has gone up and dropped back down in a period of just 5 years.
If your state offers upfront tax deductions for contributing to 529 plans, then you have all the more reason to contribute. Scared about investing in stocks? Then just buy the low risk options in the 529 plan. They may only return 1-3% per year, but if you get an upfront tax deduction you’ll be laughing all the way to the bank.
With the stock market hurting everyone’s 529 plan, it’s nice to be able to do something to make your 529 go up.
FreshmanFund.com is offering up to 100 people a $5 gift certificate to FreshmanFund. You can transfer this to your 529 plan.
For details on how to get your certificate, visit:
http://529s.com/freshman-fund-gift-certificate.html
The Wall Street Journal just published an article about college planning and 529 plans in this turbulent stock market. Among the points it makes: if you feel the need to get your money out of your 529 plan and your kid is in college, ask the college if you can pre-pay for tuition and fees. If you pull the money out of the 529 plan now and pay for college later, you will have to pay the 10% fee for withdrawing and not using the money to pay for qualified college expenses.
Here’s a link to the article.
Scared about the market downturn? We all are, but that doesn’t mean you should stop contributing to 529 college savings plans.
Wisconsin just released a number of new options for its Edvest 529 plan, including a number of less-risky options. According to a release from the state and Wells Fargo:
“The financial market’s recent volatility shouldn’t discourage families from investing in their child’s college savings plan,” said Wisconsin State Treasurer Dawn Marie Sass. “These new EdVest choices offer Wisconsin families three new conservative options, including portfolios that primarily invest in certificates of deposit that are federally insured by either the FDIC or NCUA. Combined with our existing money market portfolio and bond portfolios, EdVest offers a variety of options to meet the needs of conservative investors.”