Dear Roadie,
With all the turmoil in the financial markets, our 529 savings have taken a big hit recently. While we have moved some funds over to conservative savings, should we move more? What should we do?
— Our Savings Are Dwindling
Dear Our Savings Are Dwindling,
If you’ve logged into your 529 account recently and felt your stomach drop, you’re not alone. Market dips can make even the most seasoned savers uneasy, especially when college tuition deadlines are around the corner.
First, don’t panic. Market fluctuations are common, and 529 plans are long-term investments designed to weather them. If your student isn’t heading to college in the next year or two, you may have time for your investments to recover. Emotional, reactive decisions — like shifting all your funds to conservative options during a downturn — can lock in losses and hurt long-term growth.
Consider Your 529 Plan Timeline
If your student has two or more years until high school graduation, this might be a great time to consider moving your 529 funds into an age-based portfolio, if you’re not already using one. These portfolios are designed to take the stress out of managing your investment strategy by automatically shifting from more aggressive (stock-heavy) allocations to more conservative ones (bond/cash-heavy) as your child approaches college. It’s a simple way to stay invested for growth early on while gradually protecting what you’ve saved over time, with less day-to-day worry.
If your student is closer to college, especially if they’re a junior or senior in high school, it’s a good idea to review your current investment mix. Moving some of your funds to safer, more stable assets can help preserve what you’ve already saved, especially for expenses due in the next year or two. But that doesn’t mean you need to move everything at once. A more balanced, phased approach can give you flexibility while limiting risk.
One effective strategy is to segment your 529 savings based on when you’ll need the money:
- Funds needed in the next 12 months should be in low-risk, cash-like investments.
- Money for Years 2 through 4 can remain in moderately conservative funds.
- Any long-term funds (for graduate school or a younger sibling) can stay more growth-oriented for now.
This “bucket” approach ensures you’re not forced to sell investments during a downturn, while still allowing for potential growth over time.
Rebalance Your 529; Don’t Overhaul It
You’ve already moved some funds into conservative investments, which shows thoughtful planning. Now might be a good time to meet with a financial advisor or review your 529 plan’s tools to rebalance — just make sure your risk level matches your time horizon and comfort level. Often, a small shift is all that’s needed to align your strategy without overreacting to short-term market swings.
And don’t forget: you can continue making contributions even while your student is in college. Many states offer a tax deduction or credit for 529 contributions, even if the money is withdrawn the same year. It’s a smart way to keep benefiting from your plan while actively using it.
Have a Backup Plan
If you’re worried about tuition in the short term, explore additional funding options like scholarships, federal aid, or even using other savings temporarily while waiting for the market to recover. Many families use a mix of resources to pay for college. It doesn’t all have to come from the 529.
Also, consider using your 529 funds strategically for off-campus housing. If your student lives off campus, the 529 can still cover rent and utilities, up to the college’s published cost of attendance. Just be sure to document all expenses and consider transferring funds to your student’s account to make payments directly.
And while you’re thinking creatively, encourage family members to contribute to the 529 for birthdays or special occasions. Many plans have easy gifting tools, and in some states, those contributors may even receive a tax benefit.
Final thoughts: When markets get rocky, it’s natural to feel anxious. But taking a calm, strategic approach — rather than a reactive one — can help you make the most of what you’ve saved. You’re already doing the right thing by asking the questions. Now it’s about staying informed, staying steady, and keeping the long game in mind.
_______
Use R2C Insights to help find merit aid and schools that fit the criteria most important to your student. You’ll not only save precious time, but your student will avoid the heartache of applying to schools they aren’t likely to get into or can’t afford to attend.
👉 Looking for expert help on the road to college? See our Preferred Partner List!
Other Articles You Might Like:
Dear Roadie: Should My Daughter Write about Her Mental Health in a College Essay?
Dear Roadie: My Daughter Keeps Failing Classes. Should I Keep Paying for Them?
Holistic Admissions: Your Child Is More Than Their Grades and Test Scores
JOIN ONE OF OUR FACEBOOK GROUPS & CONNECT WITH OTHER PARENTS:
