We love putting plans together for our client’s children or grandchildren. But, as you may have read in my book, we are not fans of the market based, but tax-advantaged 529 plan.
But why? The best way to explain it is to give you an example that you would never want to follow yourself. So, let’s look at those that built college funds exclusively in the 529 when their college student was set to begin school in the Fall of 2009. Since we had the market low of the Great Recession in March 2009, pulling money out in August of 2009 to pay for school would be the worst possible scenario because we need to not TOUCH that account so that we can recapture all that we lost in the Great Recession. But, it took over 4 years for the market to recover and get back to what it had lost, by that time your child is graduating from their 4 year program. As you can see, a market based program that must be accessed at a specific time no matter what the status of the account, just doesn’t work. If the market crashes right before they are due to go to school, all that hard work you did to save and provide for them can be ruined….
Fortunately, there are other tax advantaged programs that do not have that market risk of loss at exactly the wrong time and we love working those numbers for a client’s family’s gameplan.
Browse our website to learn more about our wealth management expertise and services.
