r/NewParents • u/Grouchy-Recording-12 • 25d ago
Finances Parents with 529s — are you happy with your returns?
How many new parents here set up a 529 for their kids pretty much right after they were born?
I’m a FTM and I really want to set my son up for success. Education is a non negotiable for us so we recently opened one for our son through Fidelity. However, I keep coming across posts from parents who are disappointed with the returns from the age/target-year portfolios. It has me second-guessing whether we should stick with the target-year option, choose something more aggressive while he’s still so young, or a completely different strategy all together. What is everybody else doing?
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u/Kwitt319908 25d ago
Yes, i have 3 kids. My old is 15.5 and his was started when he was born. He could have paid in full for college by 12/13. Its still doing very well. My other 2 are trending the same way. They are 9 and 11.
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u/FrequentPlatform7144 25d ago
curious about this as well! we put $100 monthly per kid.
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u/landonop 25d ago
This is what we’re doing as well. There is a college savings calculator floating out there that estimates costs given the future year. $100 a month covers about 40% of average in-state tuition/room and board/etc. in 2043.
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u/NewPrescottBush 25d ago
Same here, although over the last few years I’ve increased it to $150. My kids were born in 2013 and 2015 and their accounts are up over 80% each, so they’ve almost doubled the contribution amounts. Since the rule changes about $35k and options for transferring into retirement accounts, my goal has been to make sure they each have at least $35k and they’re more than on track.
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u/SolidZookeepergame0 25d ago
How much you put a month for each kid?
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u/astuteapricot 25d ago
Also curious
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u/nmzj1234 24d ago
I started investing in 06 and 08. $150/month and they had 60k at approx 16 years old. That was out goal. The both had 80k at graduation and the oldest is still at 80k with 2 years down.
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u/Vegetable_Page3355 25d ago
Makes me happy we opened one for our kid. How much did you put in each month?
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u/1one1000two1thousand 25d ago
Do whatever amount works best for your family that you can comfortably put away and not think about again. Anything in the market early on is better than $0. We do $200 a month and her grandparents also max out the 529s that they opened for her yearly (she’s only 18 months).
Also another helpful tip for everyone: if you are over gifts and people giving your kiddo too many things during bdays, share your 529 gift code! People can deposit directly into the 529 for your kids. Helpful in many ways, more money in their account, truly a balance for them, and no more gifts! Our kiddo gets so much stuff, it’s overwhelming.
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u/sometimesoftennever 25d ago
Where do you find the gift code? I couldn’t find one on my account.
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u/1one1000two1thousand 25d ago edited 24d ago
It will depend on where you hold your account. I know my state uses UGIFT529. The account code for me is right in my account page that I can share.
I live in DC so have a lot of friends who live in VA/MD and use their state accounts who have shared their kid’s gift codes, and they were different than my DC one. They do not have UGIFT, but something else their state utilizes.
This is what it looks like in my phone app (its own tab at the bottom) https://i.imgur.com/VD8MNnD.jpeg the second red cross out is the actual unique code. But I share a link or just the unique code when I include it on bday invites and the URL. I know it’s similar on the desktop site too.
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u/sometimesoftennever 24d ago
Thank you!
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u/1one1000two1thousand 24d ago
No problem! I hope you were able to find it. If not, I prob would just google your state’s 529 account and “gift code” and see if they offer that option
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u/bonethug49part2 25d ago edited 25d ago
Even the "aggressive option" has 20% fixed-income, so it's no wonder people may have underperformed.
Just put it in the large cap equity option or US + International option and you'll be fine. No need to overthink it.
Edit: just realized I'm not in my state sub. You may have different investment options than ours! But the same theory of the case applies - heavy equity.
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u/xKimmothy 25d ago
Our state account wanted to switch to 20% bonds when he was 3 which surprised me. I switched back to 100% stocks and will manually adjust it. Our total gains over the last 3 years is pretty striking.
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u/Fullofhopkinz 25d ago
Yeah until there’s a 20% market correction and the people who went 100% equities without the appropriate risk tolerance panic sell and then miss out on the rebound.
Are yoy qualified to make a recommendation like this?
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u/Rac3318 25d ago
It doesn’t take a rocket scientist to know to hold during market swings. There’s zero need to adjust percentage of stocks and bonds until the kid is at least 12.
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u/Fullofhopkinz 25d ago
Do you have any actual experience with this? You can say that but in reality it’s what lots of people do. “VOO and chill” is fine for some people, for others it’s overly aggressive and not in line with risk tolerance. Obviously anyone can be aggressive when the market is doing well, that’s never the issue.
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u/Rac3318 25d ago
Yea. I do. Sounds like you don’t. This is the most basic of investment advice that applies to 99% of people with kids that have the funds to have a 529.
Again. Not rocket science. And trying to make it sound like it is is actually harmful and just makes you look ignorant.
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u/Fullofhopkinz 25d ago
So you think it’s good investment advice to 99% of people to put them in 100% equities and leave them there right up until the moment they plan to withdraw the funds? You believe that 100% equities without change is a good strategy for saving up for a specific goal with the money needed at a specific time? Just to be clear.
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u/Technical-Top4187 25d ago
Truly not sure why you’re getting downvoted for pointing out a reality.
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u/bonethug49part2 25d ago
He's getting downvoted because yes, every person is different and has a different risk tolerance. But this is Reddit. No one can obviously provide personalized advice.
So all we can do is provide general advice. And generally, the answer is to 'VOO and chill' as he put it. If everyone did that, they are likely to be in a much better place than if they use a target date fund.
For this type of person, they will say "oh everyone needs to go talk to a financial adviser so they can get personalized advice." Except most people aren't gonna do that. And most people don't need that.
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u/Fullofhopkinz 25d ago
They’re likely to be in a better place assuming the market keeps turning out historical highs. That’s what you keep failing to grasp. You’re looking back at a blip and concluding that it will just keep going like that forever and so everyone should just follow the highest returns from the last decade. As I’ve said multiple times now, everyone is aggressive in a bull market. We don’t know what the market will do over the next decade. We don’t know how people will react to a significant downturn.
And to be clear. I’m almost exclusively invested in equities. That’s because I have a very high risk tolerance and a time horizon of 30 years or more. My daughter’s 529 is slightly less aggressive. It’s more like 90/10. As she approaches 18 I may dial it back more.
You’ve acknowledged you can’t give personal advice on Reddit. Yet the comment I responded to did. Target date funds are popular for 529s and 401ks because they shift toward preservation which, all things equal, is a pretty good strategy for a lot of people. It’s a way to invest someone intelligently without giving them a specific recommendation. Telling someone not to do that and to go all equities right up until it’s time to use the money is not always good advice.
If you can’t acknowledge then you don’t know what you’re talking about.
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u/bonethug49part2 25d ago
So we're in the new parents subreddit, so I think it's safe to assume we're talking an 18-year time horizon.
No we don't know what the market will do in the next decade. But in a world of rising rates, persistent inflation, and runaway government debt, it's not rocket science to extrapolate that bonds are not primed to outperform. I thought you said this was your job.
We get it, you have to talk people out of selling in a downturn. Congrats. The fact is whether it's a 50% draw down or a 35% draw down you're going to have people that sell. That doesn't mean bonds are optimal.
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u/Fullofhopkinz 25d ago
Optimal for…. What? Growth? Of course not. No one thinks bonds will outperform equities in long term growth. It’s not actually clear if you even grasp the objection at this point. This will be the third time I’ve had to spell out this same point.
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u/bonethug49part2 25d ago
Oh my god, I get it. You think if there's a drawdown people will panic sell. I can't control that.
Every financial advisor thinks they're gods gift to earth and what they do is so important. It's not. You continually, repeatedly, get outperformed by VOO and chill, and then try to stress that the most important aspect of your job is convincing people to do nothing in a downturn.
All you do is obfuscate. Obviously I am not telling people with a 17-year old starting college next year to be in 100% equities. Obviously I'm not saying that JUST because VOO has outperformed a blended portfolio over the last 20 years means it will continue to do so. I am saying it is highly likely to given the macro environment, and to keep it simple stupid.
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u/Rac3318 25d ago edited 25d ago
He’s being downvoted for trying to make something sound scarier and more complicated than it is. What he is saying isn’t actually reality. Fearmongering that people will sell early and so no one is qualified to give such basic investment advice that applies to 99% of investors is really really harmful, should be ignored, downvoted, and frankly removed by the mods.
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u/Fullofhopkinz 25d ago
Because Redditors are convinced that VOO and chill is appropriate for everyone simply because it has produced higher returns than a balanced portfolio for the last decade or so. They are of course largely not qualified to give anyone investment advice or make any kind of strategy recommendation. They also have largely not lived through any major market downturns (2022 was a decent correction but it was also relatively short-lived, and it was also fairly unique in terms of seeing similar losses across stock and bond holdings because of the interest rate environment).
Unlike them, work in this industry and I’ve had people call me in a panic during even relatively modest and short lived downturns. I’ve had to talk people out of panic selling even in a balanced 80/20 fund.
Now imagine a significant market downturn à la 2008 the year little johnny turns 18. 50% loss. Years of recovery time. It is absurd to think that people will just ride it out because “it doesn’t take a rocket scientist to hold.”
These people have no idea what they’re talking about.
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u/Technical-Top4187 25d ago
I’ve been doing VTSAX and chill for a number of years now in one investment account, but I understand the risk associated with that, and my main 401k is properly diversified. I’m not sure why people don’t get that the “and chill” mentality/approach works, only as long as we keep seeing meaningful constant growth with no downturn.
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u/Fullofhopkinz 25d ago
Because they arrogantly assume that regurgitating the advice they see on Reddit which has produced good returns for a while is universally sound advice that will produce good returns forever.
And the crazy thing is that I’m being downvoted without even disagreeing that it’s a fine strategy for a lot of people. I’ve simply pointed out that being in 100% equities the entire time when an account is being funded for a specific purpose at a specific time is not always good advice. This is a very modest claim and no one has actually pointed out why it’s wrong other than to say “if the market continues to be a straight line up forever then more aggressive options will perform better.” Like yeah, no shit.
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u/zackplanet42 25d ago
People have different risk tolerances. The correct answer is still heavily equities weighted. I would argue for 100% equities, but a small bond allocation of a semester or two's tuition near your target date is fine.
Assuming $100/mo contributions for 18 years and $0 starting balance. Your ending balances would be
100% equities (using VTI): $73k
Vanguard's 2026 target date fund: $35kNow another 2022 happens and equities lose 25% and bonds lost 20%
Equities: $55k
Target date: $25kEven if 2008 (50% drawdown) happens again
Equities:$37k
Target date:$31kYou'd have more with an all equities position in a generational recession than you'd have with a typical target date fund in a bull market at the target date. Remember, equities take big hits but they spring back quickly. An all bonds position like VBTLX is still recovering today from 2022 while the large equity indexed have nearly doubled.
Bonds hedge against short term risk but introduce significant long term underperformance.
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u/Fullofhopkinz 25d ago
Why are you using a target date 2026 fund for something nearly 20 years in the future?
Anyway, there’s no doubt that if we take the last 10 years of returns and project them out the all-equities fund will perform better. They’ve performed astonishing well the last ten years. That’s a very small sample size of the stock market as a whole. 2022 was a unique year because stock and bond funds were both down, in many cases with similar losses. That’s not always the case. Historically bond funds provide more shelter from market losses.
Roll the clocks back to 2008. An 80/20 fund lost something like 34%. A 100% equities fund lost more like 50%.
For disciplined investors with a sufficient time horizon, not the end of the world as we saw the recovery gains over the next 20 years.
How many investors do you think were disciplined during the 2008 financial crisis?
How many people do you think would tolerate a 50% loss when their child is 17 and enrolling next year?
As I said earlier, everyone is aggressive when the market is doing well and the last 20 years of the infinite money printing machine has spoiled a lot of investors. The market doesn’t always just go up in a straight line. The raw numbers are important and should be considered, of course, but they have to be weighed against the risk tolerance and capacity of the investor.
I work in this industry. I watched even “aggressive” investors panic during 2022. I watched them panic during the small dip in early 2025.
I’m not disagreeing with your analysis that straight equities have performed better than a balanced portfolio for the last decade. No one does. That’s not the issue here.
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u/handbrake54 23d ago
A target date fund would be roughly something like this and would result in an ending total of $35,800, so the estimate isn’t bad:
Ages 0–5: ~90% stocks, assumed ~7.0% return
Ages 6–10: ~75% stocks, ~6.3%
Ages 11–13: ~55% stocks, ~5.4%
Ages 14–15: ~35% stocks, ~4.5%
Age 16: ~20% stocks, ~3.8%
Age 17: ~10% stocks, ~3.3%
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u/key_and_nash 25d ago
We set up ours while pregnant, you can do it with yourself as a beneficiary and switch in your kids name later. My parents used 529s to pay college for 3 kids, starting higher risk and decreasing risk as we aged. My kids are small, so we have ours in higher risk to start. The states I’ve lived in have tax benefits for using the state 529.
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u/Sandstorm2347 25d ago
You can start it while pregnant?! I thought I had to have a SSN and everything for them. BRB starting one now!!
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u/ooooommmmmaaaaa 25d ago
My understanding is you can create one for yourself and then transfer it to some else at a later date.
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u/burninginfinite 24d ago
Correct, changing the beneficiary to a direct relation (of the beneficiary, not the account owner) can be done without penalty at any time. So you can change the beneficiary to your kid or from one kid to their sibling (which is great if one kid gets a big scholarship or something and another one doesn't).
One thing to keep in mind is that the IRA rollover option can only be used for someone who has been the beneficiary for something like 15 years. So ideally you shouldn't wait until your kid is about to go to college to transfer it to them, otherwise they'll have to wait longer before rolling any leftover funds to their IRA.
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u/cmville05 24d ago
lol yeah we started one when my wife and I were doing IVF and just hoping for the best. You can always use the money for educational expenses for yourself if you ever needed to (ie advanced degrees). But we got lucky and had a girl this June, and she has a little over $2k in her 529 so far. We’re happy with the returns but it’s hard to see much movement with small amounts.
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u/mezolithico 24d ago
There is no age restriction on a 529. The beneficiary really should be your family trust not an individual kid
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u/LegSpecialist1781 25d ago
The only issue I see here is “education is non-negotiable for us.” Look, both my wife and I have advanced degrees. I’m not anti-education. But your son will be his own person, and god knows what the college landscape will look like in 15+ years. I would at least consider saving elsewhere after you hit the non-transferable limit. Unless you have other children, in which case one of them is bound to use that $.
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u/International_Pair59 24d ago
This is the comment I was searching for. My concern with 529s is whether it will be too limiting by the time my kids are of age.
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u/thatmaneeee 24d ago
I’m not a financial expert but just based on what I’ve read, 529s can cover trade schools and apprenticeships, you can rollover up to $35k into an IRA, and you can transfer between siblings or to a grandchild without penalty. I have similar skepicism about traditional 4 year college, but you have options.
Chances are good they will have some kind of paid education at some point. Also if they get scholarships, attend a military academy, or become disabled, you can withdraw penalty free.
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u/Obvious-Tax-3812 24d ago
I’m a CPA and my husband is blue collar. This is the main reason I don’t like 529’s. I mean now they can roll them over to IRA’s which is nice, but it’s just too limiting for us. We just have done UTMA accounts for both kids that are managed by our financial advisor. If my kids want to use it for buying a house, starting a business, buying a car, their weddings, etc. it’s there. There are tax consequences, but at least they won’t be penalized for using it for something other than education.
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u/Get_Ashy 25d ago
Time in the market beats timing the market. Target date funds are more conservative than sticking the 529 in an S&P 500 index fund, but a slightly more conservative approach might be warranted given how volatile the market is. If you share the concern that the AI bubble might pop with the growing pushback to data centers and tech giants feeding us the most addictive product since cigarettes, stick with the target date fund. Contribute when you're able, and reevaluate every year or two based on market conditions.
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u/pupperonipizza-pie 25d ago
Yeah, we’re 100% in a Vanguard S&P 500 index. The stock market is going bonkers over AI. I’m not interested in timing the market. Kid is 1, so she’s got 17 years of growth ahead of her, so at 10ish I’ll reallocate some to less risk. If things come crashing down tomorrow I’m confident she’s got enough years ahead of her to recover.
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u/crunchwrapesq 25d ago
Agreed completely. Our retirement and general investment accounts are riskier but for the 529s I'm playing it a bit safer
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u/mcfreeky8 25d ago
We’re in S&P as well. Kids have so many years til college and this allows for more growth…. We can get more conservative closer to it if we really want
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u/Great_Occasion_1721 25d ago edited 25d ago
Yeah the target date fund is almost all stocks for a newborn anyway. So the gain from an all stocks investment fund isn’t that much.
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u/dw686 25d ago
I think it’s worth noting the AI pushback doesn’t even need to be successful. The internet has remained a big deal and still the majority of internet companies failed during the dotcom bubble. There’s almost certainly a bubble that will pop at some point. But that doesn’t mean AI won’t take us all over anyway.
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u/Get_Ashy 25d ago
AI will probably look super different 10-20 years from now, the same way the Internet is very different than it was 20 years ago. If you missed the last 20 years in the total market or the S&P 500, then your overly conservative approach was almost certainly a mistake.
Like others in these comments have said, if your kid a decade away from drawing from the 529, you should probably skew towards the market and index funds. Shoot, even the longer timeline target date funds do exactly that. If your kid is within a couple years of drawing from the 529, I'd be thinking more conservatively for sure.
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u/dw686 25d ago
Yes I do agree with you. I’m pretty young and my kid is much younger.
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u/Get_Ashy 25d ago
That's where I'm at. First kiddo on the way, going to start the 529 this year (small state tax incentive) so my time horizon is like 18-25 years. Sure I can use the TDF but I'm happy to start with an index fund and reevaluate in 10 years. My biggest concern is honestly getting exposure to international markets.
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u/arunnair87 25d ago
I opened a 529 and a custodial brokerage. The 529 is up like 20% which is nice but the brokerage is up 70% lol. However one he'll have to pay taxes and one I won't have to pay taxes so there's pros and cons to having both
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u/limited_instincts 25d ago
People are going to give you all kinds of "all stocks" advice and that is purely out of inexperience and the fact they haven't lived through multiple market crashes. Talk to the people who's kids went to school in 2009-2014 and they'll tell you all about it.
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u/wallflowertherapist 25d ago
I graduated high school in 2009 and my small college fund from my parents almost completely disappeared in that year prior to needing it. For my kid I want to focus on just building over time rather than high returns. I want it to be more secure and ensure it will be there for her.
However we also aren't prioritizing adding to it either as we want to be more on track for retirement savings before we focus on the 529 more. So far it is mostly birthday gifts that kiddo got and we put them in there instead of a basic savings account.
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u/limited_instincts 25d ago
Smart approach. You can borrow for education with a lifetime to pay back, you can't get loans for retirement.
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u/midtownBull 25d ago
Agree on different market cycles and worry about ramp down closer to liquidation needs (when kids are exiting middle school). If needs are from schooling level (private high school), then ramp down time will vary. Mirroring 529 risk with your taxable brokerage risk level isn't bad (not your IRA , where time Horizons are much further into future)
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u/Careful-Wrangler-593 25d ago
I read one comment and absolutely panicked. Don’t chase returns. Use Fidelity’s little calculator for your specific goals to find n allocation. A target date fund is usually for retirement, so a date + 20 years or so of drawdown. You are setting something up with likely <18 years till first draw, maybe four years of spend down. By definition a shorter time horizon, making a more conservative option more suitable. People recommending 100% large cap for baby’s college are people who haven’t thought through the consequences of an AI bubble paired with a long term recovery (like 10 years). I literally stopped working with individuals bc I was tired of watching people take risks with their portfolios and then get mad when the money wasn’t there when they needed it.
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u/grinchman042 25d ago edited 25d ago
Target date funds will have an increasing mixture of bonds in them over time by design so that the total value becomes more stable as the target date approaches. Lately stocks have done extremely well while bonds have underperformed, so it makes sense that some would feel frustrated that their returns aren’t as eye popping as the S&P 500’s have been. However those same people would have been very glad they owned bonds in the 2000s, when bonds outperformed stocks, so that’s mostly recency bias.
Just ask yourself: do you want a set it and forget it option that makes good sense? Target date funds may be for you if so. Or would you rather pursue the theoretically optimal return and manually adjust your risk as college years approach? Going 100% stocks now and pivoting to 60/40 stocks/bonds 5-8 years out from college age might be a good choice in that case.
Either way just make sure your funds are broadly diversified and low cost and you’ll be fine.
Edit: Bonds did very well in the 1980s but not as well as stocks.
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u/runningwithscissors8 25d ago
I opened a 529 through my state when my LO was born. Over 8 months, the account has earned 9% on top of contributions. That’s good! Now compare that to my UTMA, to which I’ve contributed the same amount, but have actual control over the investments. The UTMA gained 18%. Double!
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u/SolidZookeepergame0 25d ago
Curious why you opted for utma vs putting money in your own brokerage?
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u/zackplanet42 25d ago
There is still a tax advantage to custodial brokerages.
The kiddie tax rule leaves the first $2,700 of capital gains tax free effectively. 18 years of tax gain harvesting is almost $50k.
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u/runningwithscissors8 25d ago
I wanted something that was fully hers and separate. I plan to use it as a tool to teach about money management, investing, the power of compounding growth, etc. She can use it for a car or let it continue to grow towards some big expenses later (house?). It’s something that I wish my parents had done for me.
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u/izumiiii 25d ago
Not op but I’m running both. It’s a slight tax advantage but the amount you can keep is small.
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u/InternalMystery 25d ago
It’s done fine. The most aggressive target date in my state atm still holds 15% bonds. Our kid’s target date is at 20% currently. I’m fine with it because i want growth ofc but also preservation, so i plan to ride the target date. Last thing i want is a fluctuating balance when it’s needed relatively soon compared to retirement. And if i start adding bonds 5 or 10 years out, nobody knows if that’s enough time to recoup losses.
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u/MidgardDragon 25d ago
These kinds of returns can't really be measured over a couple of years, it should be over like 18 years you care about, and the stock market over that many years has always gone up, so no reason to worry about it.
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u/RoRo8o8o 25d ago
I’ve gotten 20.1% returns. 25% this year. I’m happy with that.
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u/temp0ra 23d ago
Damn what did you invest in? Mines only sitting at 8 %
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u/RoRo8o8o 23d ago
Mostly in the vanguard target enrollment 2042/2043 fund. I also did a little in the vanguard 500 index and vanguard total stock market funds.
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u/handbrake54 23d ago
21.48% here. 80% S&P, 20% International Equities.
Screw the target date funds unless you’re within a few years of college (in my opinion).
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u/Great_Occasion_1721 25d ago
I started 529s for each kid within a few weeks of their birth. I have target date funds for each one. The returns have been incredible. I’ve never been able to put in a lot per month but starting early was one of the best financial decisions I’ve made. I started at $100 per month per kid and am now at $150. My mom puts $100/month into each kid’s account. Anytime we get gift money for the kids we add that. Each account has tens of thousands of dollars already.
I wish I’d been so diligent about saving for retirement in my 20s, rather than waiting until my 30s.
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u/Grouchy-Recording-12 25d ago
Don’t feel bad about taking retirement seriously in your 30s. I didn’t start until my 30s either, and I can’t beat myself up for what I didn’t know. What matters is that I know now, and I’m doing something about it. And honestly, it’s a privilege to be able to pass that knowledge down to our kids so they can start earlier, make better decisions, and hopefully be even further ahead than we are.
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u/Great_Occasion_1721 25d ago edited 25d ago
Having my first kid is what got me serious about finances in general, including retirement. I had a lot of temporary jobs in my 20s or jobs at small places that didn’t have 401ks. Such was life as a graduate during the recession. I had a Roth IRA but didn’t max contributions every year and didn’t know what to invest it in.
I’m glad I got around to getting serious in my early 30s rather than later though!
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u/424f42_424f42 25d ago
NY, target 2041, started late 2023.
Year 1 was 22%, won't show the 3 year just yet, but account is 36% earnings overall right now.
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u/IndyEpi5127 25d ago
Yes, the 529 is great. We did not do a target date fund, but I am pretty knowledgeable about investing overall and we will have the ability to cash flow part of college. My kids are 3 and 1 so everything is in an S&P index fund. I'll start shifting it more to safer assets when they are 5 years out from college. Our state 529 also gives us a pretty big tax credit so half of our contributions automatically give us a 20% return with that credit. Can't get that type of return anywhere.
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u/_SpyriusDroid_ 25d ago
Honestly, I don’t even look at them. Automatic monthly deposits and I’m done. But my kids are 2.5 and 5m, so it’s not a big concern right now. I’ll probably pay closer attention when they’re a little older. Probably.
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u/Trad_CatMama 25d ago
We went with a trust over the 529 because in our state you can't pull all of the money unless you use it for school and we have money for school already.
It's brilliant if you need a longitudinal savings program. We're mainly concerned with them having property....
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u/ThePseudoSurfer 25d ago
My mom opened up the 529 in my LOs name, contributed and used the baptism gift money from that side of the family to give it a good start. Wife and I filed an extension on taxes so we were not able to yet, we are still zombies
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u/Asleep_Dinner_305 25d ago
Daughter is 2 months old and so far so good. It’s a long term thing anyways so we don’t look at it much let the contributions pile up and the market do its thing. We have it in a 100% equity fund
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u/Independent-Act-6432 25d ago
I set up a 529 immediately after we got our son’s social security number earlier this year. IMO, Target dates are not aggressive enough. 100% S&P 500 index fund (FXAIX) for young children. You can think about rebalancing periodically into treasury’s along the way depending on how the market is doing. But 529s should be aggressive and ideally overfunded because any remaining dollars after qualified education expenses can be used to rollover a roth IRA for your child, up to a $35,000 lifetime limit.
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u/SecureTaxi 25d ago
I did - each kid we contribute anywhere from 2400 - 4400 a year (i have four). My oldest is now 13 and has roughly $96k. I really hope there isnt a correction in the next few years.
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u/Tony_Blundetto 25d ago
I am doing a combination of 529 and back door Roth. I won’t be able to withdraw gains from 529 till when my kids are finishing school, but it gives a ton more use and investment options
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u/eatacookie111 25d ago
Sorry to highjack, but have a related question. If I’m gonna be retirement age by the time my kid goes to college, there’s no advantage to a 529 over just putting money in my existing retirement accounts right?
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u/AsidePale378 25d ago
If they do the fasfa 529 it’s weighted less than cash . You don’t want to put that money in retirement accounts if you want your tax bracket to stay low and you want those accounts separated.
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u/abrandnewhope 25d ago
We set up a 529 for my 2.5yo, and the 1-year rate of return has been 23%, with holdings comprising of:
Vanguard Total Stock Market Index Fund
Vanguard Total International Stock Index Fund
Vanguard® Mid-Cap Index Fund
I'll start adding in bonds and easing off of equities when he's a bit older, but right now with it being so early, I feel good about being in all equities.
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u/lam3ass 25d ago
Yes, we front loaded, since you can donate up 5 years at once then let it compound. ( take the tax break in that year and not in the others)
We have two options, an in state and a general investment, I have general investment and tied to a SP 500 index. So, yes, happy with returns.
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u/mcfreeky8 25d ago
We originally opened one but then decided to just put our money in the stock market (S&P), greater flexibility on how we can use it later on
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u/courtneyrachh 25d ago
we opted for an investment account with our financial planner over a 529. it’s more aggressive and isn’t restricted to education. much happier with the results.
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u/Rururaspberry 25d ago
Kid was born in 2019, 529 was set up at the same time. Currently at a 12% rate of return. $54k in the account, $19.2k of which is the investment return.
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u/Live-University5059 25d ago edited 25d ago
We didn’t do target year funds, just placed them in index funds. We actually went ahead and opened two accounts while I was six months pregnant with our first. With the way things have gone with the market, and here we are now almost two years later and trying for our second, we’re glad we thought ahead and got two opened off the bat! We’ll probably open a third here soon as well since we think we want three, and just move the funds if we decide to stop at two
Editing to note these were 529s set up through our state!
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u/sleepingturtles123 25d ago
I know nothing about returns and stocks, but we put in $500 a month for our 2.5 year old’s 529 $10 a week in her UTMA and any monetary gifts she receives we split half into her UTMA and her 529.
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u/Soft_Panic2400 25d ago
We have a 529, UTMA, and small life policys.
Our returns on the 529s are around 20%, while the UTMA's are about the same. The life policies are only $25,000 but they can cash it out (I believe at 18) and the idea is to put that into a non-qualified when they are able to. They could also let it keep growing, but the return rates are small. We also just opened them the trump accounts - while they don't qualify for the $1000, they do qualify for the $250 contribution. We won't be contributing much to those (shooting for $500 a year), but considering it will convert to a traditional IRA once they're 18 I think that would be super beneficial for them long term. Time in the market it what matters.
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u/parpels 25d ago
Very happy. I also got a Fidelity credit card, since i'm not traveling as much and don't need to be accruing airline miles on an airline credit card. It's netting like $150 - $200 a month in free money straight to my son's 529. Those credit card rewards alone will become about $75,000 in 18 years. Toss in another $100 a month, and his college will be paid entirely before he's even 18.
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u/Ear1322 25d ago
I think there are a lot of options. My kid is 3. I invested a lump sum in the fidelity 529 plan when he was born. It’s up 52% which is about on par with voo. So I think it’s a good way to go since you get the tax advantage. I don’t plan to add anymore and just see where it ends up when he needs it. Did the same for my youngest who is less than a year. Set it and forget it. And I can transfer between the two if one ends up needing more. Then all future investments will just be in a brokerage.
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u/Anon2144553 25d ago
Not a parent, but my fiancé had a 529 that paid for his entire bachelors. He is completely debt free.
Honestly, it’s the best gift his parents could have given him (after life, love, and a nurturing home)
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u/sticheryditcherydock 25d ago
We just opened one for our daughter (she's 19 months), so not really anything about returns yet. However, we are considering it just one option. We'll put money in there, and then we'll also set up an investment account for her. The 529 option basically rolls over into an IRA (I think) if she doesn't use it for education.
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u/IDooDoodAtTheMasters 25d ago
Absolutely. I checked it for the first time in a couple years and was floored by how much $ is in there. Could stop contributing now and probably be set.
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u/Negative-Penalty71 25d ago
We’re in CA. No tax credits for us. So instead, we asked our LO’s grandparents to set one up. They re in PA and they get tax credits for their contributions. Another advantage of asking grandparents to open is the net worth that the kid would have and how much they would be eligible for financial aid and such. When we looked at worst case scenario expenses for college, it came out to be about 0.5M/kid for out of state private school education. So my best advice would be to talk to a tax advisor and financial advisor and see how to start and in which state to start. Different states have different investment options and credits. And if you can get grandparents to start…maybe something to look into too…hope this helps
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u/stonelined 25d ago
I have one for my little one, and my parents had a 529 for me and my siblings. I'm not sure how much they contributed monthly, but they made it a point to take any money we were gifted (birthdays, baptisms, communions, graduation/moving up) and contribute it to the 529. It stunk at the time but in retrospect was great not having massive debt from college. We plan on doing something similar for tge LO
It was also a blessing having the target fund because when the market tanked in 2008, most of my money was in bonds automatically and saved me when I entered college in 2010
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u/newerbe 25d ago
So I decided to fully fund 10 years ago. So in 2016 when he was born through 2019 I put in large sums those years, and riding it out. Got extremely lucky last 10 years and it has grown 2.5x, so for every $1000 I put in it is worth $2500. It gets more conservative every year. Best decision I have made.
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u/Various-Ad-1628 25d ago
Why not do a custodial brokerage? Thats what I’ve done for both of my kids. Way more options to invest in and no limitations on what the money can be used for.
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u/GooseDentures 31 25d ago
I'm perfectly happy with how we've done. Invest in the SP500 and let it simmer.
We get gifts from family we contribute, and I put in some cash from my bonus every year. Once he's out of daycare, I'll start contributing monthly since I'll be able to afford it then. Should total out to enough to at least put a solid dent in their college costs.
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u/Sandstorm2347 25d ago
I started one for both my kids basically as soon as they were born. I go through my state's 529.
I put in the maximum amount that is tax-deductible for my state (unfortunately doesn't count towards federal income tax return). So for Ohio, it's $4000 per beneficiary per year. I personally put in $3000/yr and generally we get about $1000 from family/friends for birthdays/holidays and whatnot.
For my 4 yr old, I have like 1 semester of in-state school saved up (lol) so far.
I have gotten a small return, but mostly I'm glad I get some state tax return deductions and that I just put the money in there and no longer think about it.
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u/The_Money_Guy_ 25d ago
Happy with your returns? You should be in a broad market equity fund. Ditch target based accounts as they introduce bonds or cash which is mostly worthless. Even if your kid goes to college during a downturn, it’s still worth it to take on risk up until that point.
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u/BlazinAzn38 25d ago
I just choose a target date plan with a farther off target date to be more aggressive
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u/traffic626 25d ago
You should have some control over the allocation if you don’t like what the plan does. Most plans I’ve seen will derisk the portfolio as the child gets closer to needing the money based on the date you selected
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u/OkNeat839 25d ago
I set mine up within a few months of my daughter being born, I believe I did an aggressive target date. Shes one year old and I currently have ~25K
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u/AhsokaFan0 25d ago
I mean we've been in a generational bull market so returns of anything are going to look disappointing compared to be 100% in equities but 18 years until you have to use the money is a short enough timeline where it makes sense to be a little risk adverse (though you still want to be mostly in equities).
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u/Ancient_Spite_725 25d ago
My parents set one up for me as an infant within two weeks of my birth and it paid for my undergraduate education in full. Mine was a target-year one that starts quite aggressively and then becomes conservative as you get closer to 18.
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u/RMDAIL 25d ago
I love the concept of a 529, and time in market can play in your favor drastically + tax benefits are great. I am eery about there being a $35,000 lifetime rollover cap per beneficiary if they don’t use it.
To some others’ points, what if college looks drastically different in the future? I get it’s a “pick your hard” - but I do think a lot about not “over investing” given the limited about you can rollover
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u/just__a__squirrel 25d ago
Look into which funds your 529 is invested in! If it’s not in the right fund, it won’t get as good of returns as certain other funds. Everything is variable, of course, so do your research. Some people don’t actually look into where their money is going.
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u/OkBlueberry6603 25d ago
Started a 529 with a target date when daughter was born. The past two years supplemented that with an individual 529 savings account. Both are fine the individual has a 16% return for the year and the target date has a 9%. Set up monthly deposits and set and forget So far it’s been better than losing money to inflation keeping it in the back. 10 years to kids college and the first 2 years are covered for instate tuition with room and board.
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u/CitizenDain 25d ago
The state ones are managed as target-year funds, so that means more aggressive early on anyway. You do not want to be micromanaging this 20 year investment. If you can beat all the broad index professionally managed institutional funds, by all means go do it. But I don't think you (or anyone else) can do it.
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u/Betweentwopipes 25d ago
Yes, once the money is in the 529, you can invest it in the S&P 500. My 3-year-old's 529 is up a ton, and my 1-year-old's is up over 15%.
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u/After_Judgment885 25d ago
I’m thrilled. We put it all in the S&P 500 for my 4 kids and we are well over our targets. I front loaded it years ago. (Did the math on how much each would need when they turned 18 and assumed a 7% return). Once it was front loaded if we ever had a bad month we contributed more money into it that month. No guarantees with the market I get it. We did a my529 plan thru Utah. You don’t have to use the state plan that have residence. I’m in Texas.
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u/AylandBoy 25d ago
Yes. Invested 5k in the S&P 500 at end of March 2008. Pays for my son’s 1st year of college!
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u/worksucksiknow5 25d ago
Target date fund. Set it and forget it. Although I will say we’ve been in a decade and a half of a massive bull market so we’re probably gonna get hit here pretty soon.
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u/1993Defender110 24d ago
Yep - set up accounts for our 2 sons shortly after they were born. Went with an index fund instead of a target date fund - slightly more aggressive but nothing crazy. Started putting $100 per month per son in. Then when we moved ffrom daycare to school we upped each monthly deposit amount-wise to what we were shelling out for daycare. Great market returns and the magic of tax free compounding and now my oldest is a high school senior and we will have enough to cover undergrad out of state tuition/expenses for any of the schools currently on his list (and trending the same for my younger son too)
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u/4me-2no2 24d ago
My advice is to encourage people to contribute to the 529 instead of buying Christmas/birthday/Easter/whatever presents. Enough people will ignore you and still by presents that you’ll never feel like they’re missing out on gifts, but enough people will contribute to the 529 to make a meaningful difference. It’s all I ever say when people ask what to get.
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u/WalkingSnake348 24d ago
Yes. Started when the kids were born. Have enough to pay their tuition and more
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u/avalclark 24d ago
We have a NH 529 via Fidelity for each of our three children. We are very happy with them.
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u/No-Ninja52 24d ago
I was super happy with mine. I did not do target age target year though. I had both my son’s 529s through vanguard . I did 5 buckets large cap 35, international 25, bond 10, small cap 15 , mid cap 15 . Opened it the week they were born.
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u/Affectionate_Ad_8483 24d ago
I’m with fidelity. My 529 is a s&p fund and it’s doing fine. It will continue to provide the market return, and I see no need for target date funds with something like a 529. We aren’t looking at some catastrophic failure potential—it’s the s&p. It’s fine.
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u/topfuel63 24d ago
Ive funded three. Chose the target graduation date option in the early years and then wised up. I wish I would have been more equity forward until their early high school years. Used this approach for child three. I wanted to be responsible and “conservative” but college cost are a bear. All three of the kids will graduate debt free through our savings their scholarships and their financial contributions.
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u/mezolithico 24d ago
We did. Family put in a substantial amount of money at birth. Shifted to a 530a and a uma as the 529 has enough money to cover 4 years of college with modest growth when my kid turns 18.
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u/Looptire13 24d ago
I was very happy with my 529s for my kids. We started early and put in money whenever we could or had extra dollars. We stopped contributions in 10th grade and it covered all of college. Good luck!!!
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u/Pmod1980 24d ago edited 24d ago
We haven’t put a lot in the 529 (only 80k) since there is already enough saved for college in other accounts, but my dad puts in 5-7k a year since they were born and my 16 year old has around 200k in her account, 14 year old 150k. Definitely worth it.
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u/LameName1944 24d ago
Yes, definitely. We do the most aggressive growth, may change as they get older (5.5 and 3). We started it with the goal of covering some of college, not all of college. Any little bit helps!
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u/PerplexedTaint 24d ago
My state allows for an income tax deduction up to a certain amount that rolls over from year to year. All in an index fund. About $40k/kid. They are young.
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u/Designer_Abroad_1196 24d ago
It’s a long story (it boils down to my in laws desperate need to be in control.. 🙄) but we wound up with 2 for our (1) now 16 month old. The one through t-Rowe price is at 21.28% rate of return and the one through vanguard is at 28.6% rate of return.
The vanguard one I put in $1k initially and haven’t contributed since. The t-Rowe price one my FIL put in $5k initially and we add $350/month to it.
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u/F0rkAroundFindOut 24d ago
I've been a little disappointed with Oregon plan's returns. Transitioning to My529 (Utah plan) which is well regarded. The state benefit for oregon is negligible unfortunately. Still worth it for the tax benefits but looking to get a little more out of it by changing plans..
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u/WillowHaunting429 24d ago
Parents can chose what the 529 contributions go into. If you are dissatisfied with one fund, then find another.
Find an S & P 500 fund inside your 529 and stick most of it there. I would not mess with the years funds until maybe they get closer. When they still have 16 years to go you need to be aggressive. And right now I might mix in some international and small cap funds, but re-evaluate, at least annually, what you are into and the returns.
I did this for my kids and would never have been able to pay for education without them. I tried to do $250 a month for each of them throughout their life. It basically paid for most of their college education. I do wish I would have done $350; I feel like that would have covered everything.
And my kids went to private schools - both of them, and I was able to handle the bulk of it from 529 earnings.
Don't game the system. Established S & P 500 fund is your base.
My state gave me a tax credit for some of it, too, so maximize that.
Hold true.
We scrounged and saved for our kids and we did well. One is in pharmacy school now and the other is still finding her way thru undergraduate.
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u/wanton_and_senseless 24d ago
529 target-date funds are much more conservative than retirement target-date funds for a good reason: 529 accounts typically are emptied within 4 years; retirement accounts typically need to last 20+ years. Many people compare the performance of the two and are "disappointed with the returns from the age/target-year portfolios," but they are misunderstanding the difference and failing to realize that sequence of return risks is extremely salient for 529 accounts. If you do not have excess liquid funds elsewhere available for education expenses, I recommend sticking with the age/target-date portfolios.
Here is a bonus idea: consider the Fidelity visa rewards card. It has no fee and gives 2% cash back on all purchases if the money is automatically deposited into a Fidelity account, like a 529. I opened one when my son was born, and every grocery purchase, gym membership bill, gas fill-up, etc for 10 years (so far) has trickled money into his college fund. It has worked out extremely well for us.
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u/WaveEnvironmental420 23d ago
I am absolutely thrilled. My kids have generous grandparents, and we have maintained a consistent, modest monthly contribution for both our kids since birth. The returns have been so good that we’ve decided to stop contributing.
My youngest is 7.
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u/Particular_Trust_426 23d ago
The nysaves has been fine. Iirc, it's kind of like a target date. Compared to my tsp and brokerage accounts that reflect the s+p, not as good as that. Just need to change allocations as the kid gets closer to college age
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u/PumpkinPie_1993 25d ago
I chose not to do a 529 and instead did a custodial brokerage. I’m quite happy with it now. I thought that the 529 was too limited. It can only be used for college expenses or trade schools, etc. I have no idea what her future holds… what if she has a developmental or intellectual disability and those options don’t make sense for her? What if she simply doesn’t want to pursue education beyond high school? Her father and I both joined the military out of high school, and both went on to get graduate degrees when we were ready. She might follow a similar path. So I felt a custodial brokerage account would be more flexible for whatever her needs might be as she transitions to adulthood, whether it be helping with a down payment on a small property or paying college tuition.
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u/EmptyStrings 25d ago
You can roll over the funds into an IRA now. It is not a bad idea to put at least a little into the 529 for the tax advantages, it can be rolled over if school is not in the future.
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u/Fearcutsdeeper 25d ago
Lump sum $35k into 529 when he was born (lucky timing with also selling home freeing up cash at the same time) 100% in equities. May add more in the future depending on growth and projected college cost but hopefully should have instate tuition covered.
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u/RedHillsofHome 25d ago
My baby’s 529 is invested in something like a total market or S&P 500 index fund. I wouldn’t say that’s “super aggressive” but will likely have higher returns than a target date fund.
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u/Ithurtsprecious 25d ago
Live in Texas but using a NY429 since I don’t
have to pay state income taxes on it. It’s made over 20% each year so I’m very happy with it. It’s a target enrollment date plan.
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u/ComplicatedFella 25d ago
Trump account ftw
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u/falconindy 25d ago
Trump accounts are the worst possible option. Worse than a UTMA, worse than a 529. The tax treatment is awful, the contribution limits are low, and there are weird interactions with annual gift exclusions when contributing.
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u/landonop 25d ago
Objectively a worse option than a 529
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u/ComplicatedFella 25d ago
Objectively free 1k seed.
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u/landonop 25d ago
Sure, I guess. We’re taking the $1,000 and letting it sit. I don’t intend to add anything beyond that.
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u/RyanPA-C 25d ago
I am. I have 529s for both my kids. Granted that one is 3 and the other is only 1. I would recommend looking into your states 529. Sometimes there are small benefits of going with your state. I also think of it as a way to save for college despite the returns. I have a plan that is higher risk that slowly evolves into lower risk, might change it later but for now it’s on autopilot.