529 college saving plans and why you should DIY!
Posted: June 18th, 2009 | Author: Joe | Filed under: Investing | Tags: 529 savings plan, college savings | 1 Comment »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.
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