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... Is there a strategy anyone would recommend?...

Outside the 529 an alternative to CD’s to look at is I-bonds because they are tax deferred and eventually tax free if used for qualified college expenses. The rate will change every six months but it is currently a potentially tax free 5.64% which will be hard to beat.

http://www.treasurydirect.gov/indiv/research/indepth/ibonds/...

I got lucky and moved my son’s college money into I-bonds back when the fixed rates were 2 and 3 percent so I am currently getting almost 7 and 8% which will eventually be tax free. (Sometimes it is much better to be lucky than smart!)

You can’t buy as many I-bonds much per year now because of rule changes but you could move some of the money that won’t be needed for five years in both December and January to double the purchase amount.

.... or do I sell the stocks and taking a loss?....

No matter how you use or reinvest the money, going on and taking the capital loss for the tax deduction is usually a good idea even if you will have to carry the loss forward to future years.

Greg
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