All,
I am quite surprised that this question has not been discussed here. Currently, I am researching my family options for investing in a 529 Plan. I am fully aware of several relatively low cost plans (Utah, Ohio) which offer you the ability to purchase Vanguard stock index funds, TIPS, total bond market and CD's. There is also an Ishares Plan which offers the ability to purchase short term treasuries, TLT and stocks however no gold.
Is anyone aware of an advisor or state sold plan whereby you can purchase PRPFX or mimic the PP? If not, I am curious to hear what those that adhere to the PP are doing with their 529 investments or is it not a feasible option due to the risks involved? Please advise.
Thanks,
Heather
529 Plan- What is the Best Option?
Moderator: Global Moderator
Re: 529 Plan- What is the Best Option?
There was some discussion of this in the "Saving for College" thread. I've sort of given up on building a true "Permanent Portfolio" in a 529.
The iShares funds give you the ability to invest in LT bonds but this has to be done through an advisor. An individual investor can't just sign up for an iShares 529. (I called them up to make sure of this.) Since I won't be working with an advisor, this is not an option for me. Also, their LT bond fund has a higher ER than TLT due to additional costs associated with 529s. That in itself isn't a huge surprise but is worth mentioning when comparing to low-cost options like those from Ohio.
I also don't know of any way to hold gold in a 529. It would probably be held as bullion outside of the 529.
For now I wound up just going with Ohio and doing their 40% domestic stock \ 10% international developed stock \ 50% total bond market allocation.
If anyone has a better way to approach this in order to build a PP in a 529, I'm very interested to hear about it. And then I will shamelessly steal it.
The iShares funds give you the ability to invest in LT bonds but this has to be done through an advisor. An individual investor can't just sign up for an iShares 529. (I called them up to make sure of this.) Since I won't be working with an advisor, this is not an option for me. Also, their LT bond fund has a higher ER than TLT due to additional costs associated with 529s. That in itself isn't a huge surprise but is worth mentioning when comparing to low-cost options like those from Ohio.
I also don't know of any way to hold gold in a 529. It would probably be held as bullion outside of the 529.
For now I wound up just going with Ohio and doing their 40% domestic stock \ 10% international developed stock \ 50% total bond market allocation.
If anyone has a better way to approach this in order to build a PP in a 529, I'm very interested to hear about it. And then I will shamelessly steal it.
Re: 529 Plan- What is the Best Option?
As noted in the other thread, I think step one in college savings should be max out the Coverdell account each year. Right now, that means $2,000 per child. That can go straight into PRPFX if you like the PP as a strategy.
Next, investigate whether your state offers a pre-paid tuition plan that is appealing to you. This is a great way of reducing the risk that investment returns won't align with the timing of your childrens' college attendance.
Only after fully exploiting these options would I look at 529 plans. While fund expenses are getting better following a few trips to the litigation woodshed in recent years, I think the funds in many states' plans are still ridiculous.
For me, I am able to deploy all of my college saving funds in the first two options above, so I don't participate in a 529 plan. I am happy with this decision.
Another option to consider is good old U.S. savings bonds (probably I-bonds), since their gains are tax free if used for college.
State tax considerations obviously have a bearing on the matters above. I am in Texas, so I don't have any state income tax issues to think about (which frees me up to think about how to pay my property taxes).
Next, investigate whether your state offers a pre-paid tuition plan that is appealing to you. This is a great way of reducing the risk that investment returns won't align with the timing of your childrens' college attendance.
Only after fully exploiting these options would I look at 529 plans. While fund expenses are getting better following a few trips to the litigation woodshed in recent years, I think the funds in many states' plans are still ridiculous.
For me, I am able to deploy all of my college saving funds in the first two options above, so I don't participate in a 529 plan. I am happy with this decision.
Another option to consider is good old U.S. savings bonds (probably I-bonds), since their gains are tax free if used for college.
State tax considerations obviously have a bearing on the matters above. I am in Texas, so I don't have any state income tax issues to think about (which frees me up to think about how to pay my property taxes).
Q: “Do you have funny shaped balloons?”
A: “Not unless round is funny.”
A: “Not unless round is funny.”
Re: 529 Plan- What is the Best Option?
MT & Lonewolf,
Thanks for the kind reply. It is my understanding that one cannot invest in coverdell accounts if your joint MAGI exceeds $220,000. We live in Illinois and our pre-paid tuition plan is not ideal (not too mention living in a state that is bankrupt
Anyway, Illinois does offer a state tax deduction for 529 contributions however am not enamored with their investment choices. Any further thoughts are much appreciated.
Thanks for the kind reply. It is my understanding that one cannot invest in coverdell accounts if your joint MAGI exceeds $220,000. We live in Illinois and our pre-paid tuition plan is not ideal (not too mention living in a state that is bankrupt
Anyway, Illinois does offer a state tax deduction for 529 contributions however am not enamored with their investment choices. Any further thoughts are much appreciated.
Re: 529 Plan- What is the Best Option?
Perhaps there is a grandparent who could make a Coverdell contribution if the parents are phased out of Coverdell eligibility.hrux wrote: MT & Lonewolf,
Thanks for the kind reply. It is my understanding that one cannot invest in coverdell accounts if your joint MAGI exceeds $220,000. We live in Illinois and our pre-paid tuition plan is not ideal (not too mention living in a state that is bankrupt
Q: “Do you have funny shaped balloons?”
A: “Not unless round is funny.”
A: “Not unless round is funny.”