Page 33 - Flathead Beacon // 5.27.2015

FLATHEADBEACON.COM BUSINESS MONTHLY FINANCIAL CORNER Jesse Rigler
MAY 27, 2015 | 33
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Make Timely Adjustments to Your 529 Plan
IF YOU HAVE SCHOOL-AGE children, you might greet the end of May, arrival of June with some re- lief — for at least a few months, you don’t have to worry about “encouraging” kids to do their homework, study for tests, give you their permission slips for field trips, and so on. But one day, these ob- ligations will give way to a substantially bigger one — paying for college. If you’ve already begun preparing for that day with a tax-advantaged college-savings vehicle, such as a 529 plan, you’re taking a positive step, because higher education is expensive. But it’s not enough to just set up your 529 plan — you may also need to adjust it over time.
Up until this year, you were only al- lowed to change the investments in your 529 plan once a year. This caused con- cern among some investors, who wanted the freedom to change their 529 invest- ments in response to movements in the financial markets. But late in 2014, Pres- ident Obama signed into law the Achiev- ing a Better Life Experience (ABLE) act, the key purpose of which was to create tax-free accounts allowing people to save for disability-related expenses. And one provision of the ABLE act also al- lows 529 plan investors to change their investments twice a year, rather than once.
If you invest in a 529 plan, you might welcome this additional freedom to adjust your investments. Still, keep in mind that a 529 plan is a long-term vehi- cle that’s not really designed to accom- modate frequent “tweaking.” And, as is true with any investment account, such as your IRA and 401(k), you don’t want
to over-react to short-term market fluc- tuations by making radical changes to your investment mix.
Nonetheless, you will almost cer- tainly want to adjust your 529 plan in- vestments somewhat — at least in the long term. If you’ve opened a 529 plan when your children are young, you have many years until you need to tap into the money — which means your account has more time for growth potential and more time to “smooth out” those periods of market volatility, which will certainly occur. Consequently, you may be able to afford to invest somewhat more aggres- sively when your children are young.
However, as your kids near college, you will probably want to revisit the lev- el of risk in your 529 plan. So, during the last couple of years before you need to ac- cess your plan, you may want to consider moving some of your investment dollars to more conservative allocations. By do- ing so, you’ll cut back on your growth po- tential, but you’ll also lessen the risk of taking a big hit if you have to start taking withdrawals during a “down” market.
Some 529 plans offer an option that automatically adjusts your investment mix toward a more conservative ap- proach as your children near college age. But you may want to make your own ad- justments, possibly with the help of a fi- nancial professional, to ensure that your 529 plan accurately reflects your own preferences and risk tolerance.
As you save for your children’s col- lege education, you may find a 529 plan to be a great help. Just be sure to keep a close watch on your plan’s investments as the years go by.
“AS YOU SAVE FOR YOUR CHILDREN’S COLLEGE EDUCATION, YOU MAY FIND A 529 PLAN TO BE A GREAT HELP.”
Jesse Rigler is a financial advisor at Edward Jones in Kalispell.
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