If you had a grandparent-owned 529 (stock market-based) and family savings (CD) to help pay college expenses, which would you use first?
I know the benefit of waiting until the second semester of sophomore year to use the grandparent-owned 529, but I’ve also heard simultaneous predictions of a coming crash and a hot market in 2018.
No crystal ball needed for me.
I would use the grandparent owned 529…because remember…it is available to your kid now…but the grandparents could change the beneficiaries at any time.
You have control of your money.
You can also start taking stock market money off the table. Lock in the gains for the first year or two.
I agree with moving the investments within the 529 into something more conservative than a 100% stock portfolio. Most 529 plans have more than one investment option. Spend down the assets in the parent’s name first, though.
I don’t. Please explain.
@VeryHappy Waiting to use the 529 means it won’t show up as unearned income on the FAFSA.
Thanks.
For students who are eligible for need-based aid, it makes sense to spend down the parents funds first. The grandparent owned 529 doesn’t get reported on FAFSA and isn’t included in calculations of EFC.
I use the 529 first. Things can change. Child may end up leaving school for some reason or another. Medical issues, family emergencies, grade issues etc.
If your child is starting college in the next year or so, could you (or spouse, depending on who they might listen to) convince them to move 529 to a more conservative mix?
@Aroundhere and @dragonmom, I have to look into the 529 to see what the options are. It might even be type that becomes more conservative as college age draws near. Thanks for the tip.
Thank you everyone for your advice.
@VeryHappy the FAFSA and Profile forms now use the income and withdrawals from the prior prior tax year.year. So…if someone waits until their kid is a second semester sophomore in 2017…that kid would graduate college in 2019…right?
The 2019-2020 FAFSA and Profile would use the 2017 info…and the kid would be out of undergrad school…hopefully.
We are using my college freshman’s stock-based 529 before cash savings that is allocated (mentally) for his college costs.
We are full-pay, but stock market volatility is a consideration for us. I have his 529 invested currently about 20% money market and the rest in broad market index funds. About a year ago I moved 1/4 of the funds in the 529 to money market. That percent has decreased because of stock gains, so I should probably rebalance.
I realized a number of years ago that the age-graded funds were not aggressive enough for our investing style. They were already largely in bond funds at 6 years before college. You may not have control over the investment choices of the grandparent-funded 529. (And past performance is not an indicator of future results.)
Are distributions from parent owned 529 to college kid beneficiary included in parent FAFSA info or in kid’s FAFSA info? In other words, are those funds considered parent asset? kid income? something else?
Student’s 529 accounts are considered the parent’s assets on FAFSA, so assessed at 5.6%
Here’s a question - if you have multiple parent owned 529’s for different kids, are the ones for kids other than the particular one you are filing for counted at 5.6% for FAFSA or are they not counted at all? In my case, it’s a rhetorical question at this point, because I have emptied the two accounts of the kids who have dropped out into S17’s account, but I could reallocate if either of the other two decides to go back.
I hope someone can answer that question @techmom99 because I was sure all parent owned 529’s would be counted and someone recently told me the those for other kids would not be. So now I’m confused, but still tend to think all are counted.
All parent owned 529 accounts are considered parent assets…because reality is…the parent can change the beneficiary of these to this kid at any time.
@BelknapPoint right?
ETA…for FAFSA calculation purposes, 529 accounts are assessed at 5.6% of value when computing need based aid. This is not necessarily true for schools using the Profile.
Right. All parent-owned 529 accounts, regardless of the named beneficiary, are reported as parent assets on any FAFSA on which the parent information appears, primarily for the reason cited by thumper1.