Message Font: Serif | Sans-Serif
 
No. of Recommendations: 0
Hi,

This may be a basic question: In the current market with my individual stocks down and mutual funds decimated I'm facing a dilemma: Do I sell shares in my relatively well-performing 529 fund and bond funds to pay my daughter's college expenses, or do I sell the stocks and taking a loss? Any recommendations? Is there a strategy anyone would recommend?

Thanks
Print the post Back To Top
No. of Recommendations: 1
This may be a basic question: In the current market with my individual stocks down and mutual funds decimated I'm facing a dilemma: Do I sell shares in my relatively well-performing 529 fund and bond funds to pay my daughter's college expenses, or do I sell the stocks and taking a loss? Any recommendations? Is there a strategy anyone would recommend?

My recommendation has always been to move 25% of college savings to CDs or mm funds/accounts each year of high school so it's all in a safe place at the beginning of college.

You may want to visit the Tax Strategies board to see what the taxable account losses mean to your tax bill.

What you do with the 529 depends on how much it will cover this child's college expenses and if there are siblings following for whom it could be used.

rad
Print the post Back To Top
No. of Recommendations: 1
My recommendation has always been to move 25% of college savings to CDs or mm funds/accounts each year of high school so it's all in a safe place at the beginning of college.


I'm with rad on this one, and it's the reason that we're not panicking right now in my house as I have two high school seniors who are both planning on attending college next year.

I think the current market is why the typical advice is to have any money you need within 5 years in cash. I, for one, am very glad I took that advice to heart.
Print the post Back To Top
No. of Recommendations: 0
Thanks rad. It's a bit late for the CDs for this one, but I do have a couple more coming along.
Print the post Back To Top
No. of Recommendations: 1
It's a bit late for the CDs for this one, but I do have a couple more coming along.

That gives you more choice in what to do. Basically, you can only balance $3K of losses over gains against ordinary income with your taxable account. You can change the beneficiary on the 529 as the time comes to a younger child. Be sure you have a clear picture of the 529's funds at the moment.

I don't have a strategy to recommend except whatever lets you sleep at night. I have 3 who were 3 years apart in school and was most concerned about the middle one. It meant I started moving his money fall, 1998. The only thing that helped was CD rates were pretty good then but it was a very hard thing to do. However, I was very glad I had when he headed off to college.

rad
Print the post Back To Top
No. of Recommendations: 0
... 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
Print the post Back To Top
No. of Recommendations: 0
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.

I'm not sure this is correct. I think you can buy the same amount, however it's harder now, because you can only buy half the amount in "paper bonds" and the other half in a Treasury Direct account - for which you get no "piece of paper" to put in the safe deposit box. We did that last year (2 years ago? I forget) but stopped buying I-bonds when the rates went practically to zero. We have some from long ago where the base rate is 2 and 3%, so those are OK, but basically the last couple years have been crapola.
 
Print the post Back To Top