529 Plans “Flawed at the Core”? Not Really.
This article over at The Street caught my attention today.
It suggests that the recent market downturn shows 529 plans are inherently flawed. I disagree.
It’s true that the investing time frame for college savings plans is shorter than retirement. So investing everything in risky stocks until a year or two before college is not a good idea. But most 529 plans offer “target date” funds that gradually shift to less risky investments as your kid or grand kid get closer to college.
Consider that, when you child is born, you have about a 20 year investment window. It would be silly to invest in a CD or other low rate security for 20 years. You need to understand that you can lose money, but not be so conservative that you miss out on spectacular tax benefits and earnings.