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529 Asset Allocations

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  • 529 Asset Allocations

    I have a 16, 14, and 11-year-old with Fidelity 529's. Up until recently, it's been pretty easy just to place everything in a total stock or S&P 500 index fund but with all going on in the world I'm finding myself stuck and unable to make a decision about asset rebalancing - especially with the 16 and 14-year-olds. Obviously, I want to minimize losses for the 16-year-old but I also don't want to miss out on any juicy gains that may happen between now and college. I know...trying to eat my cake and have it too...any help, suggestions, the rationale for one allocation or other is appreciated.

  • #2
    You will be needing the 529 funds in the next 2-10 years. A non-100% equity allocation is warranted since you have a short to medium time frame. I would want some cash or ST bonds for at least the first couple years of spending. Also you’ll have double spending when middle child starts college which would push me towards a more conservative allocation. Cake can go into Roth.


    • #3
      One of my friends had a daughter who started college in 2008 or 2009, and he was disappointed how relatively aggressive the age-based allocations were and how he did not have as much saved as he expected when his daughter reached college age. He had a very high income and married into a very wealthy family, so it really did not matter.

      On the other hand, I did not have a very high income, nor did I marry into a very wealthy family. In part because of his experience, my 529 allocations were fairly conservative. I know that I left some potential gains on the table, now with two kids in college at the later stages of a historic bull market, but our goals were successfully met. Unfortunately, you do not get to pick the market returns for your timeline. They just happen, and you have to deal with the results, favorable or not.


      • #4
        Is this money essential for College, or do you have other resources? We plan to keep our 529 asset allocation stable at 80% stocks for the long term. But this is just another pot of money for us, we have income and taxable accounts too so we can afford the risk.
        Last edited by FIREshrink; 02-26-2022, 07:12 PM.


        • #5
          Sort of depends on where the oldest 2 plan on going to school and what they want to do with their lives. I believe most 529s allow for a transfer between siblings, so I'd overfund the eldest and hope that you can have excess to trickle down to the other 2 as time passes.

          This also depends on if you anticipate them attending professional school and if you plan on funding it.

          I'm still quite a bit away (11 and 17 years), but I've max funded 529s to annual limit/couple and have it in 80/20 US/Intl equities. I don't anticipate changing that. I'll cash flow whatever short fall there is.


          • #6
            The advantage of the 529 is tax-free gains. If you don’t invest the account aggressively then your potentials gains are small.

            High-income families benefit the most from 529s and most could cash flow any drop in assets.