The sentence "Money you plan to spend in the near term should not be in equities, period." implies that you think in buckets. In other words "I have $x in account y that I intend to use for purpose z. Therefore the asset allocation for this account should be a/b." It's not a terrible way to manage money, people do it quite a bit, and even though it's not optimal, if it helps them to stay the course, it's fine.The fact that a 529 has an expiration date makes it completely different from a Roth. With a high school senior, you don't have 10+ years to wait out a major draw down if it happens. I can afford to fund my girl's college without using any 529 plan assets, but I don't want to be caught up the creek without a paddle being required to spend down those assets over a very short timeline. Money you plan to spend in the near term should not be in equities, period.If one has enough assets to cover the cost of college without a problem, 529 becomes simply a way to increase your tax sheltered space. It is really just another Roth IRA with an expiration date.
The alternative is to look all your assets and liabilities holistically and determine that for my specific situation "my asset allocation across all accounts should be a/b. Considering tax implications I'm going to place asset class x into account y." For example if you determined that it was optimal to place equities in 529, and market crashed, because you kept your cash/bonds in taxable, that can compensate. In the end it doesn't really matter from which account the college is paid for...
Statistics: Posted by ivgrivchuck — Sat Oct 05, 2024 8:19 pm — Replies 36 — Views 1854
