Comments on: Why I Can’t Afford A 529 College Savings Plan

By: FamilyGuy

FamilyGuy — Thu, 16 Apr 2009 15:24:25 +0000

I agree that many 529 savings plans are mismanaged. One need only look at at Oregon’s suing Oppenheimer Funds overs its 529 plan, i.e., risky credit default swaps and other mortgage derivatives sold as an ultra-conservative investment. Your post also made a great point of needing to know exactly (insofar as possible) how your money is invested. Asset allocation should help preserve one’s portfolio as your child approaches college. If you child is less than five years away from college, you need to question the need for equities in your portfolio at all. Fortunately, our son is young enough that we can take some market ups and downs in hopes of greater long term returns. Best of luck with your college savings!

By: Grant

Grant — Wed, 15 Apr 2009 13:36:20 +0000

@FamilyGuy

You have a good point, FamilyGuy, taxes and inflation should be part of the equation. However, you can account for taxes and inflation all you want, but if the value of your kids college investment account drops by 40% the year (s)he’s ready to go to college, taxes and inflation don’t matter a bit.

The point of the post is that the majority of 529 savings plans are mismanaged to and don’t reallocated positions and risk with age like they’re supposed to.

By: FamilyGuy

FamilyGuy — Tue, 14 Apr 2009 16:22:31 +0000

I’m 38 years old and just started a 529 plan for our newborn son. I think that your post underestimates the impact of taxes and inflation. Historically, inflation has averaged 3% annually and tuition inflation between 4-7%. Assuming that college cost projections are correct, in-state college will cost upwards of $150,000 in 18 years and private colleges close to a quarter of a million dollars. Thus, it is hard to imagine financing the cost of college with bank CDs (or perhaps even savings bonds). There are no guarantees in life and even fewer in investing, but a reasonable asset allocation and market returns may be our best hope.

By: Weekend Linkage - March 22, 2009: Visit To The New York Botanical Garden

Weekend Linkage - March 22, 2009: Visit To The New York Botanical Garden — Mon, 23 Mar 2009 02:49:52 +0000

[...] Why I Can’t Afford A 529 College Savings Plan @ The Corner Office Blog [...]

By: Winston

Winston — Sun, 22 Mar 2009 16:21:57 +0000

i’ve no kids and don’t plan on any for a while. but great post, very interesting statistics regarding college plans. i’ve always been curious why retirement plans, and apparently college plans as well, are so structured against time to retirement, or enrolment. i understand it’s a major component, but it seems as if fundamental market conditions get put on the back burner….advisors/managers get too used to the models that are being given to them by the monkeys in the back office…