Issue Date: May 10, 2009
MoneySmart |
WALECIA KONRAD |
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Revise 529 plans
The market meltdown means most 529 state college savings plans are awash in red ink. Joe Hurley of Savingforcollege.com, which ranks these plans, offers this advice, based on your child's age.
Age 10 and under: Hang tight. Stocks are still your best chance to see your money grow at a rate that even begins to approach yearly tuition hikes. But look to see if your plan has an age-based option that automatically moves you into more conservative investments (bonds, cash) as your child approaches college age.
Age 11 to 16: Consider putting new contributions in conservative investments and leaving your current portfolio as is. That way, you can hedge your bets with new money and remain well positioned for a stock market rebound. (Note: In 2009 only, the IRS is allowing 529-plan investors to make changes twice a year instead of once.)
Age 17 AND UP: It's time to switch all or most of your portfolio to conservative investments. If you used an age-based option, you should be OK, but check to be sure. A few 529s keep as much as two-thirds of an older teen's portfolio in equities, which may make you nervous.
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