Keep Contributing to your 529 Plan
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.
Good advice that I’m always happy to see. College is a 10 – 20 year invest for most people, and markets are going to have ups and downs during that time. Consistent savings will ensure that you benefit from the long term appreciation markets have historically generated.
I agree that one should keep buying stocks, ideally taking advantage of dollar-cost averaging. But is there some way to deduct the losses in a 529B plan? With my current losses, I expect that I will realize a very minimal tax break for the monies already invested. Ok, I took a risk by investing in a 529 in hopes of a tax break. But I would like to know if I have the option to reset my baseline investment amount, deduct losses, or someway recover some of the losses as are available in a non-tax advantage accounts. The program goal is to encourage college saving, after all.
I have received notice form our COllegechoice 529 plan here in INdiana. We receieved notice that we were being audited for that credit. We were to send copies of our credit claim and we just received notice that the cdredit has been totally denied and we hav eto pay penalties and interest. Any help i nthis situation. Bad enough loosing the 529 so drastically much less have to pay penalties, for something the state of Indiana told us to do