Is there a targeted retirement account equivalent for college savings?

[RusticBohemian]

If you've got an 18-year horizon from child birth to college, I'd imagine Vanguard would come out with something that would start aggressively with mostly stocks and progress to fewer stocks and more bonds as you approach the final 5 years or so. Anything out there like this?

[AnonymousCoward]

Wouldn't a target date fund fit the bill? The name of the fund doesn't matter if it serves the purpose. There's a chart at [1] that shows how the asset allocation changes relative to to date.

[1]: https://investor.vanguard.com/mutual-funds/target-retirement/#/

[sokoloff]

Yes.

https://investor.vanguard.com/529-plan/age-based-options

[protostache]

Wouldn't a target date fund fit the bill? The name of the fund doesn't matter if it serves the purpose. There's a chart at [1] that shows how the asset allocation changes relative to to date.

[1]: https://investor.vanguard.com/mutual-funds/target-retirement/#/

Not quite. It's definitely the same concept, but a target retirement fund generally assumes someone is going to be spending the funds down over the course of 15-20 years after the target date. College savings don't really work like that because the spend down period is generally going to be 4-5 years, 10 years at the outside max for extensive educations. The glide slope needs to be steeper and the percentage in equities after the target date should be quite a bit less. 529 plan target date funds are generally set up like this.

I've been thinking about this quite a bit because the majority of my two year old's college savings are in a UTMA where college-oriented target date funds aren't available. Right now it's 100% in a total US stock market ETF. I've been thinking about putting new money into a target fund with a target about 10 years before she would want to be using it, but I'm not really sure if that's the thing to do either.

[EvenSteven]

I don't know of a fund that does this automatically, but some 529 plans give age based investment suggestions using the funds available to that 529 plan.

Here is the MO plan with age based suggestions:

https://www.missourimost.org/home/investments/age-based-options.html

[secondcor521]

Idaho has a similar thing:

https://www.idsaves.org/home/investment-options/age-based-portfolios.html

[toganet]

NY has similar options as well.  https://www.nysaves.org/home/which-investments/age-based-options.html

This is an interesting special case, as you have a shorter accumulation phase AND an intentionally short drawdown phase. 

NY's advice at first seemed a bit too conservative until I realized the shortened accumulation phase means less chance of recovery.  Likewise, as soon as the child hits college age they advise moving everything to short-term reserves, as you need to preserve your capital, and 4 or so years isn't a lot lost opportunity.

[TeresaB]

MD's 529 plans have target date funds for college.

[Dicey]

DH set one up for our grandbaby. I just noticed it's a 70/30 mix, which seems ridiculously conservative for a two year old. Anyone have any thoughts on this? I'm completely inclined to go 100% equities, so I'm interested to hear what other mustachians are doing.

[sokoloff]

DH set one up for our grandbaby. I just noticed it's a 70/30 mix, which seems ridiculously conservative for a two year old. Anyone have any thoughts on this? I'm completely inclined to go 100% equities, so I'm interested to hear what other mustachians are doing.

I agree with your inclination.

I view the 529 money as being invested for my kids' lifetime (not even just for their until-college lifetime, though I will shift slightly more conservative in their high school years because of the need to spend specifically the 529 money soon), so I have it in as equity-weighted investments as possible in the plan.

I take this view because the alternative to spending 529 plan money is spending UTMA funds, taking student loans, or spending "my" money, all of which will end up eventually flowing down to them anyway.

Only in the situation where attending their chosen college would be possible vs not possible based on the 529 plan balance would I switch into more conservative investments before they were in high school. I don't expect that to be the case for us.

[soccerluvof4]

WI has with there 529 an automatic risk adjustment that if you want to override you can which we liked. When 2 of our  4 kids became freshman in HS it kicked in and protected downside risk. 2 to go!