For those of us who jumped into 529 savings accounts as a great, tax-free way to save for college, the disappointment and worry when we check account balances in this down stock market is very real. So what do we do about it?
First, get the big picture. Check in on how your 529s are performing compared to other 529 plans. Morningstar is a good place to start, and the Wall Street Journal did a good job comparing 529 plans in the spring (before the market's biggest drops.)
If you're sticking with your plan, here's some good advice from Savingforcollege.com's Joe Hurley, who breaks down what we should do depending on the age of our kids. Check out the full piece, but here's a brief look:
Kids age 0-10: Basically, ride it out. Keep investing because you are ostensibly buying cheap stocks which, as history tells us, will rebound and repay you when you need to tap into the funds as the college years hit.
Kids age 11-16: You've probably taken a tough hit as college approaches, especially if your kids are closer to 16 than 11. Hurley says what you do depends on your outlook and comfort with risk. If you think the market will rebound, you may want to stay with investing more of the funds in stocks in the hope of recouping losses. If you think the market's downward momentum is far from over, you may want to consider choosing your plan's more conservative options, including money market portfolio, guaranteed or stable-value portfolio, or bank CD option,earlier than you had planned.
Kids at 17 and up: If you chose an age-based option, your account is likely somewhat protected because of a switch toward bonds and money markets as your child nears college age. But if you have remained heavily invested in stocks instead, then you may either target your funds for the later years of college in hopes of a rebound, or cut your losses, and switch to the money-market or other more conservative savings option in your plan.