Many people who invest in a 529 college saving plan for future college costs, took a big hit in the 2008 market crash – some more than they should have!
Many 529 plans offer the age-based option, which is supposed gradually shift from stocks to bonds to cash as the target college date nears. The problem, as discussed in this Boomberg article , is that some 529 plans got greedy and kept too much in stocks:
“Irresponsible age-based funds gamble on earning higher returns. They continue to hold a large proportion of stocks and risky bonds, even for 19- and 20-year-olds. These are the funds that get parents into trouble. If you are paying tuition this year, 20 percent or more of your college money might be gone. “
Yikes!
It just goes to show that with 529 plans, as with 401(k) plans, those super simple lifestyle or age-based funds are only as good as the managers. This is a big reason why I skipped these funds in the 529 accounts for my children. The oldest is only 5, so I have the bulk of the account assets in stocks, but will adjust the allocation myself as they make their way through the school system.
My first choice is the Monetta Young Investor Fund for college savings. Low minimum investment, unique investment approach.