Parents Are Learning a Harsh Lesson With 529 Savings Plans

[MULTIZ321]

Parents Are Learning a Harsh Lesson With 529 Savings Plans
By Amanda Tarlton/ News/ Fatherly/ fatherly.com

"Because of a huge downturn in the stock market, several American families are worried about their 529 savings plans. But don't worry. There's still hope.

Americans who are funding their child’s college with a 529 savings plan have taken a hit lately due to the recent downturn in the stock market. But financial experts say there are ways to avoid further losses with proper planning and know-how.

Thanks to benefits like tax-free withdrawals and state income tax deductions, 529 savings plans have become increasingly popular. In fact, the amount of money invested in 529 plans in the United States reached an all-time high in 2018 at a staggering $328.9 billion spread across 13.6 million accounts.

So how can parents protect their funds during a down market? 529 College Savings Plan Consultant Vince Sullivan of SavingForCollege.com says that the best option is to set up an age-based account, where the money is invested more conservatively the closer the child gets to college age.

“With an age-based approach, risk is automatically reduced at specific age / years-until-enrollment intervals, from equities to fixed income securities to money market type portfolios,” Sullivan says. “The sooner [parents] need to access their money to fulfill a prior obligation (like college), the less risk that should be taken with that sum of money.”....."

Pexels



Richard

 

[dougp26364]

I get tickled at the news media. This story has been around every time the market dips or drops. The same can be said for ANY investment goal, including retirement. And yet, so many people ignore this advice and leave their savings in higher risk investments trying to get the biggest return, which also comes with the biggest risk.

I can’t tell you how many of my co-workers are crying about their 401K’s taking a hit, even though they have decades before they retire. Most want to move their money to lower risk investments or, sell when they’re plans are at a low point, then they’ll shift them back when the market corrects itself or, buy when their plans are at a high point.

Regardless of how many times this story, or others like it, might run, people still make the same investment mistakes.

 

[bogey21]

I set up 529s for my 3 Grandkids. They are pretty much invested 80% Age Based and 20% quasi Fixed Income. Balances in all increased during 2017 but only because of my monthly deposits into them. Earnings were flat to slightly negative. I hasten to add that earnings in prior years were great...

George

 

[artringwald]

For the long term investor, market dips or drops mean that stocks are on sale and it's time to buy more. Occasional re-balancing will help you to do that. Figure out what your stocks vs bond/cash percentages should be, when it gets off balance, use one to buy more of the other. It's called couch potato investing and works best when psycho investors cause wild swings in the market.

 

[pedro47]

For the long term investor, market dips or drops mean that stocks are on sale and it's time to buy more. Occasional re-balancing will help you to do that. Figure out what your stocks vs bond/cash percentages should be, when it gets off balance, use one to buy more of the other. It's called couch potato investing and works best when psycho investors cause wild swings in the market.

You are so correct with your comments. This is why you should buy blue chips stock that pays dividends when the market dips or drops. IMHO.

 

[dougp26364]

News media, like timeshare sales persons, thrive on scare tactics or dramatic statements. They want to put out those big scary headlines to grab your attention. Let's face it, a headline of, "Good news for egg lovers!" just won't get enough clicks to generate advertising dollars and pay the bills.

Maybe paper newspapers, back when people had subscriptions and the news media had a steady income, was the best way to get our "news". At least they could run "reasonable" news stories without worry of keeping click counts up to generate advertising dollars. Maybe the future of news needs to be subscription services but, at this point, who'd be willing to pay for a subscription when it's to easy to find "free" news articles, because there will always be a news source willing to earn their paycheck on advertising click counts.

 

[pedro47]

I agree Doug26364, once upon a time a paper newspaper was the best source of detail true information; both sides of a story was given a chance to discuss their problems. They did not publish fake news like today; if they made a mistake in their print publication they ran a correction news article in bold print. Television news casters of years ago reported the news. They were not Democratic, Republicans, Liberals, or Conservatives. Their job was to report the daily new events. End of news show for that night. IMHO.

.

 

[artringwald]

Maybe paper newspapers, back when people had subscriptions and the news media had a steady income, was the best way to get our "news". At least they could run "reasonable" news stories without worry of keeping click counts up to generate advertising dollars. Maybe the future of news needs to be subscription services but, at this point, who'd be willing to pay for a subscription when it's to easy to find "free" news articles, because there will always be a news source willing to earn their paycheck on advertising click counts.

I still like getting a newspaper every day. Nothing flashes to distract me when I read it. I don't have to scroll up and down. The articles are organized into sections. And I can do Sudoku with a pen (while our parakeet tries to play with the shiny pen). When we're on vacation I get the eEdition of our home town paper, but I also enjoy reading the print edition of the local paper of the resort area.

I think most newspapers still try and report the news honestly, but they certainly adjust headlines and article priorities to match their reader base. Both Minneapolis and St. Paul publish newspapers, and there's a noticeable difference in what they report. I subscribe to the Minneapolis paper because the comics are better.

 

[A.Win]

I have a loss in my 529s because I opened them recently. I was hoping I could benefit from a tax loss, but I learned that you can't deduct losses unless they exceed 2% of AGI.

Seems that my taxable accounts have big taxes to be paid, while my tax deferred/tax free accounts don't perform as well.

 

[pedro47]

Thanks you artringwald and doug26364 for your honest comments. I still liked to read
our daily newspaper in print and on vacation I enjoy reading our eEdition.

I still enjoy reading the old comic strips; but I play Sudoku with a pencil. The numbers /mind sometimes plays tricks. LOL.