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  • 529 allocations

    Hi all

    I have 2 kids one 8 years old and the other 20 months old. I do 10 k per child per year for NY 529 college plan.
    what should be the ideal and practical strategies for allocations as well as contributions to come out bright and shine when they need these funds?

    Thanks

  • #2
    Mine is in the most aggressive option (60/40 TSM/INT stocks). As the child is nearer to college will shift to more bonds, probably.

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    • #3
      Originally posted by sandy View Post
      Hi all

      I have 2 kids one 8 years old and the other 20 months old. I do 10 k per child per year for NY 529 college plan.
      what should be the ideal and practical strategies for allocations as well as contributions to come out bright and shine when they need these funds?

      Thanks
      as with most things, it depends.

      you should look at the vanguard site, they have an age-based approach and I think 3 categories of risk tolerance, so you can see how the professionals approach.

      Comment


      • #4
        So many unknown variables - public vs private college -which one will one choose. Do you plan to pay only for public and let them take out the loan for the difference. One gets scholarship and other does not. Do you reduce the amounts?

        Put equal amounts but then not enough time for growth for elder child unless you already have some for her in her 529

        Or calculate proportions. One is 2 years and other is 8. Assume age of college at 18. So put 16/26 for elder and 10/26 for the younger and adjust accordingly over the years. Too complicated for me.

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        • #5
          I have my kids in the aggressive growth plan. I think it is 60/40 US/INT stock. I have not decided if I will add bonds when it gets closer. Depends if I have the ability to cash flow or not. If I cut back or RE by then I might be more conservative. If not I might stay aggressive and cash flow if down market and use it with later kids.

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          • #6
            I have a 2 and 4 year old, and in the NY Saves plan we do 80% aggressive age based and 20% aggressive. I do this because the age based gets very conservative as they get to 18, and want the exposure to stocks incase I forget to rebalance.

            We only put in 5K per child.

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            • #7
              I’ve got a 5yo and a 2yo. Have invested 10k/year/child in total US fund. Targeting 250k for each, conservatively assuming 6% returns for US fund, switching to 100% “in college” blend fund sometime between 0-4 years out from payments (pending market cycles) and anticipating 2% returns there. Recently reduced to 5k/year/child. Ok with having more and paying penalty, or legacy-ing the leftovers.

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              • #8
                Start aggressive and get more conservative when getting closer to needing them. Your starting and ending points are up to you.

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                • #9
                  18 years isn’t that long of a horizon. Go big or go home. Cash flow the difference. And excess gets passed to future generations to reduce cash outflows for my kids.

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                  • #10
                    I have one for my grandsons I started 2 yrs ago. They are now 4 and 2. It's 100% VTSAX. I figure I can decrease the risk over time but take aggressive stance now. I put in the full $10K/yr as that's the amount I get the max tax break.

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                    • #11
                      I did the the age based and front loaded it. Moved to moderate age based last year, from aggressive. No other managing from me.

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                      • #12
                        Originally posted by sandy View Post
                        Hi all

                        I have 2 kids one 8 years old and the other 20 months old. I do 10 k per child per year for NY 529 college plan.
                        what should be the ideal and practical strategies for allocations as well as contributions to come out bright and shine when they need these funds?

                        Thanks
                        What's your goal?

                        Comment


                        • #13
                          Originally posted by ENT Doc View Post
                          18 years isn’t that long of a horizon. Go big or go home. Cash flow the difference. And excess gets passed to future generations to reduce cash outflows for my kids.
                          Cash flow the difference only works if you have the cash flow to do so. No one has the crystal ball for the future. Maybe in 18 years you are now part time and have 50% less cash coming in; meanwhile you just bought your forever retirement beach house and calculated that you are "ok" making the payments. Maybe the year your kid starts college you have one mother of a trip planned (let's say 40K) and the market tanks and now you cancel your trip. Maybe two years before your kid started college your aging parent needed a nursing home and guess what? doctor kid left paying for it and there goes your cash flow..... just saying you need to know the risks of "cash flow".

                          Comment


                          • #14
                            Originally posted by bean1970 View Post

                            Cash flow the difference only works if you have the cash flow to do so. No one has the crystal ball for the future. Maybe in 18 years you are now part time and have 50% less cash coming in; meanwhile you just bought your forever retirement beach house and calculated that you are "ok" making the payments. Maybe the year your kid starts college you have one mother of a trip planned (let's say 40K) and the market tanks and now you cancel your trip. Maybe two years before your kid started college your aging parent needed a nursing home and guess what? doctor kid left paying for it and there goes your cash flow..... just saying you need to know the risks of "cash flow".
                            Many of those examples were the doctor putting themselves in the precarious cash flow situation. Presumably paying for their kid's college was an actual financial goal. They are putting that goal at risk with those decisions. Further, I'm not advocating for cash flowing unless you absolutely have to. I'm suggesting go invest early, and invest heavily towards risky assets. You will more often than not be right, meet your goals, and won't have to cash flow the difference. But part of having a goal is being prepared to meet that goal given uncertainties - managing downside risk, if you will. A 40k trip or buying a second big house are not examples of such thoughtful behavior given assumed goal prioritization of funding kids' education over a presumably elective 40k trip or second home.

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                            • #15
                              The age-based portfolio get too conservative as the child nears 18 IMO. That's only a good option if you don't want to take any risk with the 529 money and are willing to earn bond-like returns. I would either go equity (100% stock) or high-equity (75/25 stock/bond).

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