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529- Timing

  • Avatar Frenchbulldog 
    Participant
    Status: Physician
    Posts: 3
    Joined: 07/28/2018

    I’m considering the 529 $150,000 one-time deposit, and hopefully that would cover College expenses.  My child is currently 3 years old.  However during the time that it has taken me to save for this deposit the market continues to rise.  The program I’m using is allocated versus the child’s age, common with most 529 applications, its heavy on stocks early and as the child nears 18 years old heavy in bonds. Due to the nature of the 529 account only having a short amount of time to mature and considering the one time deposit option, would it be wise to wait for stocks to cool off of that prior to making this one time deposit?

    #230908 Reply
    Avatar G 
    Participant
    Status: Physician, Small Business Owner
    Posts: 1799
    Joined: 01/08/2016

    unless you have some inside information, no, it does not make sense to wait.  that is classic market-timing mentality.

    I superfunded in mid-late 2018 and was bummed to see the market correct.  but now look at it.

    toss it in and don’t worry about it for 15 years.

    #230914 Reply
    Avatar ZZZ 
    Participant
    Status: Spouse
    Posts: 697
    Joined: 06/18/2018

    “However during the time that it has taken me to save for this deposit”
    Why not just put it in the 529 over time as you accumulated the money? What’s the point of leaving it in a checking account to write one big check as opposed to 30k one year, 30k the next?

    “Due to the nature of the 529 account only having a short amount of time to mature ”
    Your kid is 3. You’ve got 15-18 years for the money to grow before you may need it. That’s not exactly a short investing window. Over the last 15 years, the S&P with dividends has returned 263%.

    “would it be wise to wait for stocks to cool off of that prior to making this one time deposit?”
    What if they never do? If you’re that sure there will be a big dip, use that 150k to fund some massive shorts.

    Big thing is to structure it to take advantage of your state tax break.

    #230916 Reply
    Avatar DocNextDoor 
    Participant
    Status: Physician
    Posts: 57
    Joined: 01/27/2018
    account only having a short amount of time to mature

    Click to expand…

    I’m thinking 529 will be used for private school tuition K-12 and then beyond, if so it depends on the yearly tuition for K-12

    #230924 Reply
    Liked by Frenchbulldog
    Avatar bean1970 
    Participant
    Status: Physician
    Posts: 550
    Joined: 07/12/2017
    during the time that it has taken me to save for this deposit

    Click to expand…

    how long did it take you? lump sum deposits do better head to head with dollar cost averaging for the most part, but if this took you a while to save for you would have probably been better off to have been DCA’ing that money particularly if you were just holding it in checking or savings account….

    #230929 Reply
    Liked by Frenchbulldog
    Avatar ZZZ 
    Participant
    Status: Spouse
    Posts: 697
    Joined: 06/18/2018

    @docnextdoor, “I’m thinking 529 will be used for private school tuition K-12”

    Well, the OP did say “hopefully that would cover college expenses”…so I’m thinking he plans to use it for, uh, college expenses.

    #230931 Reply
    Lordosis Lordosis 
    Participant
    Status: Physician
    Posts: 1807
    Joined: 02/11/2019

    Do not time the market.  Just dump it in.

    “Never let your sense of morals prevent you from doing what is right.”

    #230936 Reply
    Liked by Frenchbulldog
    Andrew Musbach Andrew Musbach 
    Participant
    Status: Financial Advisor, Small Business Owner
    Posts: 39
    Joined: 10/19/2017

    A couple other considerations before deciding about super funding your 529:

    • Does your state offer a tax deduction for 529 plan contributions? Does your state allow you to carryforward the deduction?
    • Do you plan on having more than 1 child? If not, there is a chance you’d overfund your 529 plan, especially if your child goes to a public in-state school.
    • Are you on track with all your other goals like retirement?

    It’s great to have a long time horizon allowing the money in your 529 account to start growing tax-deferred, but just because you have the funds earmarked for college doesn’t mean it always makes the most sense to superfund your 529. Having a taxable account earmarked as a backstop to cover some college costs gives you more flexibility and the ability to tax loss harvest if you’re worried about the market temporarily going down again in the near term. But yes, I agree with everyone else about not trying to time the market with your decision of when to invest the $150k, it’s just a matter of how much to put in the 529 v. taxable account.

    Andrew Musbach, CFP® | [email protected]
    MD Wealth Management, LLC | http://www.mdwmllc.com

    #230952 Reply
    Liked by Frenchbulldog
    Avatar Infinity 
    Participant
    Status: Physician
    Posts: 91
    Joined: 05/25/2019

    Agree with others, I would put it all in now.

    If it does not grow as much as you like in 15 years, you can leave it for your grand children.

    That is what I am planning to do.

    I use total stock market funds, because I don’t know how much or when I will need.

    #231103 Reply
    Liked by Frenchbulldog

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