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Thread: Another 529 Plan Question

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    #1

    Another 529 Plan Question

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    So we are looking to open a USAA 529 plan for our unborn son but since he is not yet born, will be making either my husband or myself the beneficiary until he is born. When he becomes the beneficiary we plan to have a profile based on his age, but what would be the best saving profile for when we are the beneficiary? Age-based would not be beneficial since we are both around 30. Since it will be many years before he can withdraw from it would it be wise to invest aggressively? Or should we stick to a mixed profile, or a conservative one?? Thanks

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    #2
    Can you have a portfolio that mimics how it will be when he is born? With the age based for your son I would imagine that the youger he is the more aggressive the portfolio and then as he gets older and closer to college age it will get more and more conservative to preserve capital. So I guess I would think since its for your son anyways you can just pick a more aggressive portfolio. It's not really too long of a period anyways until your son is born and he becomes the beneficiary anyways.
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    Not conservative definitely. If you plan to have it be used 18 or so years from now, I would either go aggressive for the first 5 years or so, and then go to mixed, or simply do mixed now and stay mixed until 3-4 years out from when it will be used. When money wont be used for more than 5-7 years, mixed is the way to go to get the largest gain. And if it wont be used for >20 years or so, aggressive is the way to get the largest gain. mean, you WILL lose some that way, but in the end, it should be overall gain. You know...unless we become the next Greece.
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    #4
    You can just pick one of the fixed allocation options until he is born. For example, the moderate portfolio has a balanced mix of stocks (55%), bonds (39%), cash(2%), and alternatives (4%). You can check out the various fixed allocation options at usaa.com. Here's a link to the portfolio page.
    J.J. Montanaro is a CERTIFIED FINANCIAL PLANNER practicioner with USAA Financial Planning Services one of the USAA family of companies.
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    #5
    Thanks guys

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    #6
    When I saw your thread, I wanted to add the 529 should stay in your name. FAFSA is impacted less by parents' finances than the child's. I had money in my name from my grandma, and due to that I haven't been eligible for much aid. If you do have money in the child's name, exhaust that as soon as possible.
    Just my two cents!

    I have a mutual fund that is moderately aggressive, and my financial planner told me it takes about 6 mo to a year to recoup fees for opening and to start making money.
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    #7
    Quote Originally Posted by Clumsy View Post
    When I saw your thread, I wanted to add the 529 should stay in your name. FAFSA is impacted less by parents' finances than the child's.
    Just to clarify--while a student's assets do count heavier for FAFSA, a 529 is considered a parental asset...even if the student is the beneficiary. The exception to this is if the 529 plan is a "custodial plan." AND THE STUDENT IS CONSIDERED INDEPENDENT That Could be the case if money that belonged to the child (UTMA/UGMA accounts) was used to set up the account. In the example described here, the 529 that was set up would not be a custodial account OWNED BY INDEPENDENT STUDENT and thus would be treated as a "less FAFSA impacting" parental asset.
    Last edited by USAA_JJ; 10-24-2012 at 09:21 AM. Reason: accuracy
    J.J. Montanaro is a CERTIFIED FINANCIAL PLANNER practicioner with USAA Financial Planning Services one of the USAA family of companies.
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    #8
    Quote Originally Posted by USAA_JJ View Post
    Just to clarify--while a student's assets do count heavier for FAFSA, a 529 is considered a parental asset...even if the student is the beneficiary. The exception to this is if the 529 plan is a "custodial plan." That would be the case if money that belonged to the child (UTMA/UGMA accounts) was used to set up the account. In the example described here, the 529 that was set up would not be a custodial account and would be treated as a "less FAFSA impacting" parental account.
    Out of curiosity, what if the account was set up by a grandparent? Whose asset would it be, then?

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    #9
    I just edited myself above--the 529 will, in most cases, be considered a favorable parental asset (not an unfavorable student's asset) in the FAFSA calculations. If grandparents are the owner, the value is NOT included in the FAFSA calculation.
    J.J. Montanaro is a CERTIFIED FINANCIAL PLANNER practicioner with USAA Financial Planning Services one of the USAA family of companies.

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