Tag: 529-plan

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401k and Personal Finance

My Plan for my old daughter’s 529 Plan

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I don’t have a lot of money in the 529 plan. And all is in the Vanguard S&P 500 index fund (Vanguard 500 Index Option).

I am thinking, if/when the S&P 500 index bounces back to the previous high (6,147.43), I am going to start convert some of S&P 500 index fund into Vanguard High Yield Corporate Option (something similar to this, I think). I will do it in the increment of 5% or 10%.

Here is 5 year chart comparison between the two Vanguard funds (stock vs bond). And the max comparison: bond start from 05/17/85; stocks from 11/03/00.

I also googled – is there a period bond performed better than stock. And some more readings for me.

How often do bonds outperform stocks?

How Often Do Long-Term Bonds Beat Stocks?

7 Reasons Not to Use a 100% Stock Portfolio

This will be a good exercise for me in terms of withdrawing from an account: converting from stocks to cash over the time etc.

(Update 05-16-2025) I did one percent conversion today, from S&P to high yield bond fund. Was 100% S&P, after today it should be 99% S&P, 1% bond.

Before and after

(05-27-2025) 98% vs 2% now

(06-18-2025) 97% vs 3% as the market close on 06-20-25. I submitted the request a bit late and didn’t make it to Wednesday’s cutoff, and Thursday 6/19 is Juneteenth holiday and no stock market in the USA.

(06-24-2025) It appears the above exchange did not happen, as I saw the below message from the account:

Exchange your assets
Your last exchange was processed on May 27, 2025. You have performed the two exchanges that are permitted in this calendar year per IRS regulations. You will be allowed to exchange again on Jan 1, 2026.

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401k and Personal Finance advice and tips Edu-and-Ladue-School kids

More on 529 plans

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About 14 or 15 years ago when my old daughter was new born, I saved some money and put it into her 529 plan. About a year later, I wrote this blog post Some questions about 529 plan.

I haven’t put in much new money into her 529 plan since the early days, and for our younger daughter I did open an account for her, but I only put in couple hundreds dollars. I know I know: but it’s not because we favorite one daughter over another. It’s mostly because the money is tight, and I think 529 plan had one downside: the money can only be used for higher education (college etc.). For me flexibility is important as I was also thinking about retirement – I mean quitting my 9 to 5 job, and potentially do something else I would enjoy more: and potentially with a smaller paycheck too.

529 plan had some change to the rules recently. This is a big one: You can now transfer some 529 amounts to a Roth IRA.

Note I am late to the Roth IRA party too. Actually I opened a Roth IRA (my first) at Robinhood App last year (after the tax day). So my one year anniversary will come up this April 🙂

College cost, along with healthcare cost and housing are top three most expensive things Americans pay in last 20+ years. If there is anything we can alleviate or do, we should.

Traditionally I am under impression as in America 18 year old is considered adult (or beginning of adulthood), American parents share some college cost with the kids, in general or on average. I have seen two extremes: parents pay all; parents pay nothing. I also saw two kinds of students too: those who work hard and do their best; those who quit and had to drop their classes or get an “F”.

There is no one size fit all for the college cost (sharing cost, or not) among all the families. For me personally, I would try my best to pay off my kids (I have two) college cost (tuition plus living cost). Anything they earn: scholarship, part time job are icing on the cake.

That’s the main motivation factor behind my investing and uber driving (or other side gigs, ideally $500 an hour consulting will work out better 🙂

FAQs

Do I have to open 529 plan in my state (the state I live in)?

No. See this Answers to Questions about 529 Plans in Different States for longer answer.

What state plan do you recommend?

Ohio 529 collegeadvantage plan. Sorry show me state 🙂 Also you may want to look at the answer to the next question.

What are the best 529 plans in 2025?

Forbes thinks those are the best.

What if my kid is already in high school?

Better late than never in terms of saving. However, you do need to think about the investment options, your tolerance for risk and market volatility, etc. I know for my better half (my wife), she is pretty much risk averse, and hates volatility. So in those cases, you may consider the bond investment options vs. stock mutual fund.

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finance

Some questions about 529 plan

Reading Time: 2 minutesI got those questions from a reader:
Why there is no national 529 plan? Looking at some states plan, it’s pretty much mutual funds like 401k, the investment return is like S&P? Why bother (consider S&P return is so low)?

I am not expert on this, I think why each state has a plan is pretty much why each employer (or most employers) has a 401k plan. The main purpose for such as plan is this: 1) Save some money for future liability (retirement or college tuition); 2) Hopefully the money can grow with the power of compound interest (snow ball effect); The tax deferral (in the case of 401k) or tax deduction (most 529 plans) are just ice on the cake.

As to why there is no national plan and federal tax deduction, I think this partially explained by college savings is still very small compared to retirement savings. Another indicator is the sales (or willingness for people to pay) my iPhone retirement savings/college savings app. Basically I gave away college savings calculator there because very few people are willing to pay 99 cents.

A side note: most people think spx (S&P index) is just boring, and some people think their retirement savings investments can grow 20% year over year. I think those people are too optimistic about their future. WSJ has an excellent article “The other midlife crisis” which explains why people expectations on income growth and retirement investment return are unrealistic.
Retirement income picture (via WSJ)

Categories
finance Fun

Baby is 100 days old

Reading Time: < 1 minuteShe started the following new tricks recently: eat her own hands; she can raise her head for 10 to 15 seconds during tummy training; she can either smile (with or without stimulation) or giggle (with stimulation).

Continue reading “Baby is 100 days old”
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401k and Personal Finance

Enroll in Ohio College Advantage 529 Plan and receive $50 bonus

Reading Time: 4 minutes(Update 08-01-2010) It seems the referral still works. Feel free to use my referral code 2568778, and email me after you enroll. I will send you the $25 Amazon gift card as soon as I receive the referral bonus from Ohio 529 plan.

(Update 06-29-2010) My mistake, there is not limit in terms of the number of referral. But the deadline (to get referral bonus) is still valid, June 30, 2010.

(Update 06-22-2010) 10 Referral used. 2 more remaining. Note the offer expires on June 30, 2010. Send me a note after you enroll, if you like the Amazon gift card 😀

(Update 04-27-2010) First referral bonus received and the $25 Amazon gift card sent. Please note this offer is limit to first 12 accounts opened using my referral code.

CollegeAdvantageReferralBonus2010-04-27 AmazonThankYou2010-04-27

Why should I worry about my kid’s college now? She/he is just 3 years old, it’s 15 years away.
I know I know I know. I am a procrastinator too. A little more than a month ago, my daughter was born. I joked I would worry about her college tuition because I will be near retirement age when she goes to college.

But seriously, from my own 10 years 401K savings experience, “start early, and invest in high quality investments regularly” is the right thing to do. The other day, I found Nightly Business Report (NBR) folks at PBS did a nice job on this topic. They have a series of planning 101: paying for college covers the rising college costs, and how the parents can prepare well before kids going to college, very impressive reports. The only thing left for us, the parents (new or old), is action.

What is 529 Plan?
Obviously you can google and find the answer. Here is some explanation from SavingForCollege.com: A 529 Plan is an education savings plan operated by a state or educational institution designed to help families set aside funds for future college costs. It is named after Section 529 of the Internal Revenue Code which created these types of savings plans in 1996. According to the 529 plan interview at NBR (PBS), the tuition does not have to be college, it can be graduate school or re-training. I think the tax treatment of expenses other than higher education might be different (read more from Wiki and other material if you are interested).

What are the factors when we consider the plans (in-state vs. out of state; can we transfer the money later)?

Continue reading “Enroll in Ohio College Advantage 529 Plan and receive bonus”
Categories
finance

Better early than late: join college 529 plan

Reading Time: 2 minutesI was thinking about this for a few days, and I took the plunge today. The kicker is the referral bonus from Ohio College Advantage 529 plan, as I read from my friend theSunsFinancialDiary.

As to investment choice, I picked the Vanguard Winsor II (which I got to know from my 401k plan), because its relative out performance over S&P 500. But the investment choice probably is not as important as “start early” (snowball or compound interest effect). Similar things can be said for state tax deduction from 529 plan contribution.

In case you are interested, please use my number 2568778 as referral code when you open account at Ohio 529 Plan, that way you will get the $25 bonus, and I will also receive some bonus money (provided you open and fund at least $25 to the account, by June 30, 2010). A rare win-win situation in the financial world 😀

(Update) PBS NBR Paying for college: the 529 plan. It also suggests “open an account as soon as the baby is born”. Another interesting thing is, 529 can be used for graduate school and re-training.

(Update 2) Comparing the fund options between Missouri 529 (MOST) and Ohio College Advantage plan, it seems to me Show Me State does not have much to show on this. Here is Morningstar’s best and worst 529 plans. One thing to note is while Ohio CollegeAdvantage 529 Savings Plan is among the best, Ohio Putnam CollegeAdvantage (broker-sold) is among the worst. So keep this in mind: a state could have multiple plans. Choose the winner, not the loser.

(Update 3) I wrote the 529 plan in more detail at stlplace, and I will give additional $25 to those who use my reference code 2568778. So the total bonus for you will be $50.

(Update 4: 6-17-2010) I found this Kiplinger’s Find the Best 529 Plan to be interesting. One interesting point I noticed is the Show Me State (Missouri) offers state tax credit/deduction for any plan. In other words, we got lucky that we don’t have to enroll in the Missouri plan (which is not that good in my personal opinion), while get the same tax benefits. You can read the tax benefits of 529 plan at savingforcollege.com.