How is your 529 allocated?

**Like2Plan** · 05-28-2009, 05:59 PM

Our DS is already in college.

My 529 for DS had evolved to 25% stocks and 75% fixed income. This was the recommended mix for DS's age group (it had been a higher percentage of stocks to begin with). It was supposed to evolve to 100% fixed income in Jan 2009, but the fund managers delayed that because they didn't want to liquidate all the remaining 25% stocks when the market was down. I did a rollover and moved the funds into 100% fixed income in Jan 2009.

DH also had an evolving portfolio, but I started him in a more aggressive position. By last Jan, it was 50/50 stocks and fixed income. I was a little concerned about the sub prime mortgage mess impact on the market and having too much exposure (especially for someone already in college). In Jan 2008, I rolled him over to 100% fixed income.

DH and I invest the same amount at the same time (it is done automatically). We have also taken distributions from both of them for college expenses, but DH's has earned about 1% more than my 529.

**arthurb999** · 06-02-2009, 10:35 AM

I"m just now looking at 529 for my son... (he's 1) so I'm thinking vanguard total market fund which is available in my state... as they get closer to age 18... you should become more conserative...

**pikey412** · 06-03-2009, 04:11 AM

I have a question about 529...

What if you save for 18 years and your child decides college isn't for them. Or they get a full scholarship. Are there penalties if the money isn't used for the child's higher education?

**disneysteve** · 06-03-2009, 04:57 AM

Originally posted by pikey412 View Post

I have a question about 529...

What if you save for 18 years and your child decides college isn't for them. Or they get a full scholarship. Are there penalties if the money isn't used for the child's higher education?

529 money can always be withdrawn and you pay the taxes due and a 10% penalty. You can also change the beneficiary to another person, so if you have a younger child, you can switch the account into his name. Even a parent can become beneficiary if you are going back to school or taking advanced classes for something.

I think there are also provisions for students who get scholarships but I'm not sure how that works.

**pikey412** · 06-03-2009, 06:39 AM

Originally posted by disneysteve View Post

529 money can always be withdrawn and you pay the taxes due and a 10% penalty.

Just on the interest?

**arthurb999** · 06-03-2009, 07:46 AM

i think the entire amount then you also pay gains on the earnings...

**disneysteve** · 06-03-2009, 08:00 AM

Originally posted by pikey412 View Post

Just on the interest?

Originally posted by arthurb999 View Post

i think the entire amount then you also pay gains on the earnings...

You should only have to pay taxes on the gains, since the principal was already taxed before it went in.

As for the 10% penalty, I'm not sure about that. That might be on the full amount but I'd have to research that.

**Like2Plan** · 06-03-2009, 02:24 PM

Originally posted by disneysteve View Post

You should only have to pay taxes on the gains, since the principal was already taxed before it went in.

As for the 10% penalty, I'm not sure about that. That might be on the full amount but I'd have to research that.

The 10% penalty is on the gains.

link to bankrate.com

**Like2Plan** · 06-03-2009, 02:31 PM

.. Depending on your state, there may also be tax consequences at the state level if you have been taking a write off on state taxes for the contributions (in the case of taking e a distribution for a non-qualified expense. )

**Like2Plan** · 06-03-2009, 02:38 PM

Originally posted by pikey412 View Post

I have a question about 529...

Or they get a full scholarship.

In the case of the scholarship, you could take the money out of the 529 and you would pay taxes on the earnings, but no penalties.

Link to bankrate.com Q &A Scholarships and 529s

**feh** · 06-04-2009, 09:21 AM

Originally posted by disneysteve View Post

I'm just curious what others are doing. Our daughter is 13 and will start college in 2014. Until 3 months ago, her 529 was all in the aggressive age-adjusted growth portfolio. Since age 11, that has been 50/50 stocks and bonds. At age 15, it changes to 25/75 stocks and bonds.

Three months ago, I decided to get more conservative. I didn't move the money already in the plan but directed new contributions to the bond fund so the stock percentage will gradually decrease as the ongoing contributions build up.

What are the rest of you doing?

Our 529 is in an evolving fund - I'm not sure what the percentages are as of today (our son is 9 years from college).

IMO - this isn't the time to get conservative. Look at what's happened to the market the last 3 months...

**moneybags** · 06-05-2009, 12:41 PM

My oldest is 15. Unfortunately, I procrastinated and didn't rebalance to a more conservative mix when I should have. I'm currently riding it out and figure that I can use it for my 12 year old if necessary.

**tripods68** · 06-05-2009, 02:35 PM

I'm using Target Date funds for my kids.

**disneysteve** · 06-05-2009, 04:59 PM

Originally posted by tripods68 View Post

I'm using Target Date funds for my kids.

Be careful. The various companies handle those differently. Some of them are overly aggressive and still have a big chunk of money in stocks when the kid is college-age. Many folks discovered this in the past year or so when they saw the account value of their high school junior or senior drop 20%.

How is your 529 allocated?