As your child enters high school it’s important to review the investment allocation of your 529 account(s) if you have not done so already. We recommend reviewing your account allocation annually, however, it’s especially important when you get within a few years of needing to utilize the funds in case you are overly aggressive and taking too much risk or possible too conservative given your needs. Another factor to consider when determining the proper investment allocation is that in general the funds saved need to last beyond the beginning of their post-secondary education (often 4 to 5 years!).
We believe trying to time the market is a losing game so it’s important to ensure the investment allocation is appropriate given your specific situation.
When your child enters ninth grade you can utilize the FAFSA4caster (https://fafsa.ed.gov/FAFSA/app/f4cForm?execution=e2s1) to get an idea of how much you may be expected to pay for post – secondary education expenses. Your Expected Family Contribution (EFC) will give you an idea of how much financial aid you might expect to receive and how much you might be expected to pay. The calculation used to determine your EFC is beyond the scope of this post, however, as a general rule remember that parent assets are “taxed” at 5.6% and student assets are “taxed” at 20% for the calculation. Please note that retirement assets such as a 401k, 403b, IRA, are exempt from the calculation.
As your child enters their senior year it’s pivotal to complete the FAFSA (Free Application for Federal Student Aid) as soon as possible after release. The current release date and earliest you can submit the FAFSA is October 1st. Some financial aid is first come first served so early completion will give you the best chance of receiving aid if you are eligible. Be aware that each post – secondary institution has their own FAFSA deadline which is another reason to get it completed as early as possible.
Planning to help a child or children with post – secondary education expenses is an important part of a comprehensive financial plan that’s tailored to your specific needs.