Buffalo, NY (WBEN) As some look at their 401k plans, parents may get worried over NY's 529 college savings program in light of recent market downturns. Financial experts say if you use one model, you have little to worry about.
Jeff Boron of SendYourKidsToCollege.org says the level of concern depends on the time that they're going to need these funds. "So if you've got a student who is in school and they've got a tuition payment that you use a 529 plan for in the near future, this is a little more concerning than if you've got a 529 for someone who's not going to enter college for, let's say, four or five years," says Boron. He notes most 529 plans have an age based portfolio option, which means they get more conservative the closer you need the funds. "They offer a wide sweeping range of investments, market indices, different funds, and, most importantly, an age based portfolio, which is kind of a set it and forget it," notes Boron. "You put it in there when your child is born, it'll be very aggressive and it'll become more conservative, the closer the student is going to need these funds so that we can draw on a market downturn, if they are conservative, without being being too hurt by this market."
Boron says if you're putting money away, it's probably a great time, because stocks and other investments are on sale. "With this market downturn, most analysts are saying this is a pretty good entry point. So Saving money is never a bad thing. Trying to time a market is very difficult, but with this recent drop, it may be a good opportunity to invest funds in 529, and other vehicles, because hopefully this market will bounce back fairly quickly," explains Boron.
Michael Shaver of the Financial Guys agrees the age based model is best. "The age based model is where JP Morgan or Vanguard, which are the two custodians of 529s in the state of New York. So they're one year old, then obviously JP Morgan or Vanguard's gonna allocate more towards equities and very little to no stocks. And then as the child gets older, the custodian, Vanguard, or JP Morgan, they'll automatically move the money to more bonds, less stocks, as the child's getting closer to college age," says Shaver.
Shaver says if parents chose a more aggressive plan because their child was two years old and they haven't really took a look at it, now is a good time. "Encourage parents like in a 401K, where they're investing systematically every paycheck. A lot of parents don't do that in a 529, plan, right? It seems like maybe they'll invest once a year or twice a year on the child's birthday, setting up a monthly systematic would certainly be a wise idea when markets are bound to end down and they're systematically investing on that monthly basis that would certainly help them buy these great investments at a discounted price," recommends Shaver.
