529 question, seeking advice

[Callitaday2022]

I have a 17yo that will be going to college next year. Colorado 529 is with Vanguard and currently about 75% Aggressive Growth and 25% Conservative Growth.

Probably too late, but need to start shifting to more conservative funds.* 529 fund money should cover about 75% room, board,* and tuition, and we will cash flow the rest.

I think it's given that rates will go up, so not sure what best options are.*
Advice appreciated

Options: Colorado 529 all Vanguard funds
Aggressive growth portfolio
70% Vanguard institutional total stock market index fund
30% Vanguard total international stock index

Stock index portfolio
Hundred percent Vanguard institutional total stock market index fund

Growth portfolio
52.5% Vanguard institutional total stock market index fund
*22.5% Vanguard total international stock index fund
20% Vanguard total bond market 2 index funds
5% Vanguard total international bond index fund

Moderate growth portfolio
35% Vanguard institutional total stock market index fund
15% Vanguard total international stock index fund
40% Vanguard total bond market 2 index fund
10% Vanguard total international bond index fund

Bond Index portfolio
100-percent percent Vanguard total bond market index fund

Conservative growth portfolio
60% Vanguard total bond market 2 index fund
15% Vanguard total international Bond Index Fund
17.5% Vanguard institutional total stock market index
7.5% Vanguard total international stock index fund

Income portfolio
42% Vanguard total bond market 2 index funds
18% Vanguard short-term inflation protected securities index fund
15% Vanguard total international bond index fund
25% Vanguard prime money market fund

Money market portfolio
100% Vanguard prime money market fund

 

[LOL!]

You will not spend all the 529 money in the next year since your child will probably be in college for a few years.

Make sure you are able to capture the American Opportunity Tax Credit in full every year.

As for the 529 allocation, I'd go moderate for a couple more years, then conservative for the last two years.

We can't predict the future, so we cannot say what the best options will be.

 

[RE2Boys]

I've got my 19 and 17 year old in Utah 529 plans, also Vanguard. The 19 yr old starts college Sept 2016, younger a year behind. Utah allows a custom portfolio option, I've currently have the funds about 20% Total Stock Market, 80% Vanguard Short Term Investment Grade Corp bond fund. Figure ideally all the funds will be spent in next 5 years max. Probably ease out of stocks with each withdrawal. To get the American Opportunity Credit, first $4000 of tuition each year will be paid out of current cashflow before tapping 529. I also have option of Series EE/I savings bonds that can be applied for education so tax free interest.

I've had my 529 plans for about 15 years.

 

[Htown Harry]

Have you considered moving an increasing share over to the Stable Value Plus option offered by Colorado? 2.54% for 2016 will certainly be a better option than the money market fund.

 

[RE2Boys]

Have you considered moving an increasing share over to the Stable Value Plus option offered by Colorado? 2.54% for 2016 will certainly be a better option than the money market fund.

You have a short time horizon of needing the money, If I had this option in my plan, I'd jump on it with 80% of the funds, maybe keep the last 20% in equities, would skip any bond fund except short term

Edit to add that since my high school senior just had a birthday last week, his 529 equity allocation is down to 12.5% (just checked) according to an allocation table that I had set up at Utah's website some 5 years ago.

 

[sengsational]

Your time horizon for, say 25% of the money is 1 year, 25% is 2 years, etc. If I could get 2.6% in a guaranteed income fund, I'd have at least half of it there, if not all of it. No bonds. I'm just not short term bullish in equities because of the historically high cape ratio.

 

[Htown Harry]

The Colorado Stable Value Fund is available to anyone. This Texan with a college sophomore has been stashing 529 dollars there for the last several years.

 

[DrRoy]

2.54% in a stable value fund is a slam dunk for your non equity portion. You cannot get that rate for short term money anywhere else and there is no principle risk from rising rates.

 

[Closet_Gamer]

Another option would be a guaranteed tuition fund. In PA we have access to a 529 plan that is "gauranteed" to grow at the pace of college inflation. I like it because I pretty much know at any given time how many semesters of college I've already bought. I'm pretty dedicated to the proposition that "once you've won the battle stop fighting" so I don't/haven't tried to optimize the growth of this money. Rather I've just played to have all the money set aside before the kids start college.

I put "guaranteed" in quotes because the PA plan does NOT have recourse to the state purse. They're really just creating a structure where they pool everyone's money with a longer time horizon that allows them to smooth out the ups and downs and then count on market growth to outpace college inflation. In a disaster you're only gauranteed return of principle.

They were shaky after the 2008 debacle (but who wasn't? My other college savings had gotten hammered anyway). Fund Mgmt put in place some changes that made it a little less of a good deal but shored it up. I read the actuarial report every year and they seem like they do a really great job running it.

YMMV.
Free advice is worth what you pay for it.
Any and all other appropriate disclaimers you can think of ��

 

[Brat]

We have our grandchildren's 529 in WA guaranteed tuition fund. The value of each unit was pegged at the price at WA's universities. Then the state started to cut the cost of college and the financial structure of the 529 was turned on it's head. We asked for their one time offer of payout but the administrators gave us notice that it wouldn't be happening for several months.

 

[Htown Harry]

I missed it at the time, but here's a December blog post with some additional thoughts on Colorado's stable value fund for 529 accounts.
Colorado Stable Value Plus 529 Plan: 2.54% Return Guaranteed In 2016