Jan 5, 2009 7:07 pm US/Eastern
College Savings Accounts Take A Hit
(WBZ)
College is still a long way off for Joseph Connolly's kids, but he became concerned when he opened a recent statement for his college fund. "Seeing the numbers, I had to call the company and say, 'Am I seeing this information correctly?', and sadly, I was."
As the stock market nose dived, so did the
529 plan Joe had for his two boys. The statements revealed a combined loss of $6,000. Joseph thought about switching plans, but in the end, did nothing. "When I looked at what a bath I've taken based on the earnings or lack there of, it didn't make much sense to liquidate and switch now."
Learn More: About 529 Plans
For most parents, after buying a house, college is the next biggest expense they'll face in their lifetime. Despite these recent dwindling returns, investment experts are still advising clients to take a long term approach. Joe Hurley of
bankrate.com advises "If you move too quickly right now, you could regret it later on."
Hurley says parents with young children should invest in age-based 529's because they tend to be a little more aggressive. "You really should have most of your investments in stocks because over time they should perform best, and give you the best hope of keeping up with tuition."
Age-based plans become more conservative as a child nears college age. If the returns still worry you, remember that liquidating an account early has consequences. That's the case unless you are "underwater", meaning the value is actually less than your investment. In that case, Hurley says "the investor might be able to take a tax loss." That money can be reinvested in another 529 after 60 days, or the liquidated funds can also be moved to a more conservative investment, like a CD.
Joseph Connolly has some time to make up lost ground, and remains somewhat optimistic that he will be able to help his boys out with their education.
"I will be happy if we are able to provide half or more of the funding for my children's college." It's just going to take time, patience, and a little luck.
For more information you can visit
savingforcollege.com.
(© MMIX, CBS Broadcasting Inc. All Rights Reserved.)
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