College Savings / 529 Plan Check-In

Our son’s J-Term from college ended yesterday. He’s been out of the classroom since just before Christmas and will be starting his Spring semester today. It’s hard to believe the he’ll be finishing his Junior year in a few months and he has already started to interview for summer internships.

I thought this might be a good time to look back on how the 15 years of saving for college has turned out for us. I last wrote about college savings & expenses when he was still in high school in THIS POST. It’s hard to believe that the 21 year old young man we now drink whisky with was once a three-year old that we named on a 529 plan back in the year 2000.

In short, the saving we did for his tuition, room & board, and books has gone really well. I’ve been drawing down his 529 each semester for the last three years and it has about one more semester left in it. The last semester we will just pay out of our general savings, as we also did for some summer classes he took to get ahead on credits.

When you are first starting, it’s hard to know exactly how much to put into a tax-free 529 Plan. Colleges come with a lot of different price tags, and we only have one child, so we can’t rollover extra money to the next dependent (it could also have been used for grad school). I wrote THIS POST on the difficulty in knowing if you are getting a good value in selecting a college a few years ago.

Still it has all worked out without any surprises. I would estimate that the tax savings from the 529 Plan will fund about 3 semesters worth of his Bachelor’s degree – out of his 8 semesters total. Next fall I’ll take the last withdrawal from the account, but already consider it one of the simplest and most useful investments we’ve made.

How has your experience with college savings plans been?

Image Credit: (c) MrFireStation.com, University of St Thomas (St. Paul, MN)

8 thoughts on “College Savings / 529 Plan Check-In

  1. Hey Mr Firestation. I haven’t had to withdraw anything from the kids’ 529s yet, but I will in about 2.5 years. I have a question for you on when/how to do it. Do you typically pay for the semester and then withdraw money to cover it or pay directly out of the 529? I have been extremely fortunate in that all of the grandparents that my three kiddos have have contributed significantly to different 529s throughout their years.

    Liked by 1 person

    1. For us, it’s been super easy. I can ‘wire’ the money directly to the college through the 529 website. We have everything together in one 529 plan – the Wisconsin one.

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  2. Awesome post. How aggressive were you with aset allocation when you started? I have a two year old and have a 529 with the GA plan. I recently changed my asset allocation to 100% stocks in November. I’m using TIEIX. It’s a Large Blend index fund.
    Benchmark Russell 3000
    28% Large Growth, 25% Large Blend, 24% Large value. 5%med value, 2% micro value

    Market Cap of TIEIX
    47.35% Giant
    28.89% Large
    17.23% medium
    5.83% small
    0.7% micro

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    1. I was initially aggressive with a S&P 500 index fund, but before the 2008 market crash, I had moved it to one of those selections that automatically adjust to our son’s age. He started college in 2016, so we were within a 10 year horizon at that point. The age-adjusted plans tend to be on the conservative side, but at some point protecting what you have takes priority.

      Liked by 1 person

      1. Thank you for your response. I was talking with someone not too long ago and they had children about to finish college and told me that their 529 accounts didn’t have much capital gains. I told them they might have had the wrong asset allocation because I know there is also a money market account option and I am not sure if that is what they choose. They were surprised to know that the asset allocation could be changed.

        I think I will follow your advice and change to a more conservative plan when we are within 10 years of the start of college, as long a we are not in a market crash.

        Liked by 1 person

      2. Some states offer more investment options than others. Wisconsin was pretty good. I would guess that when my son started college, at least half of the total balance was capital gains.

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  3. Very helpful Mr. Firestation. We are about 4 months from starting to draw against our 529s. We should have enough for about 2.5 years for each child. We also started putting in a little each month when our kids were very young. I wanted to confirm 2 strategies. 1. Spend down all 529’s on permitted expenses before tapping other sources, helps with Financial Aid if you need to go that direction. 2. No reason to continue contributing monthly as there is little time left to get any real tax free gains.

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    1. Yes – We’re choosing to drain the 529 fund before spending other $$$. It’s not appreciating at this point, so why not? We stopped putting $$$ into the fund a few years before he started. Haven’t made any new deposits because the $$$ are invested in the lowest risk investment selection.

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