The Money Mustache Community
Learning, Sharing, and Teaching => Mini Money Mustaches => Topic started by: protostache on November 28, 2018, 12:39:59 PM
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My 2 year old daughter has a UTMA account with about $14,000 in it, comprised of $13,000 of Fidelity Total Stock Market and a $1000 CD maturing in January. The point of this account is to either help finance college when she's ready, or if she chooses not to go to college as a sort of "life starter fund" (help pay for trade school, buy a set of tools, jump start her FIRE path, etc.). My secondary goal is to make this account as hands-off as possible.
I'd like to start sloping the asset allocation away from stocks as she gets older. Ideally I'd use a target date fund like those found inside 529 accounts, but those are for some reason not available. The account has realized ~$1k of short term gains and ~$300 of long term gains for 2018 and the TSM is basically flat for the year.
Here's my plan:
- Sell the TSM, realize either a meager gain or loss
- Buy $12,500 of Fidelity Four In One Index FFNOX (85% stock, 15% bond) and $500 Fidelity Total US Bond Index FXNAX
- Direct FFNOX dividends into FXNAX
- When the CD matures, split it between FFNOX and FXNAX
- Future contributions will mostly be in the form of appreciated shares of FFNOX which I'll sell inside the UTMA
- Tax gain harvesting up to the top of the 0% bracket every year
Does this plan make sense? Should I be looking at something else? Would a target date fund make more sense?
I have a newborn daughter that I plan on replicating this with as well. I'd like to make them as equal as possible.
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You're over-thinking. Put everything in the Total Stock fund for the next 12 years. When she's 13 or 14, revisit. Remember, in 12 years, the money for her senior year of college still has 7 more years before it's needed.