Hi folks,
I'd like to get some input on either switching investments within Vanguard's 529 plan, or else switching away from Vanguard's 529 plan entirely and going with someone else. I've got two kids and VG 529 plans for each, set these up years ago mostly on autopilot and they are both currently invested in the Vanguard 'Target Enrollment' portfolios of the appropriate graduation years.
I recently made an unpleasant discovery about these portfolios, which is they have a large (and ever increasing) allocation to the Nevada Short Term Reserves Fund which pays a pitiful yield of ~2.6% (compared to Vanguard Money Market funds yielding >5%). For young families that are just starting out 529s this is mostly a moot point because they will have minimal exposure to this fund. However, our kids are approaching college age and after many years of diligent saving and investing these 529 plan accounts have healthy balances a large and growing (40->60%) portion of the balance is stuck in this lackluster Nevada Short Term Reserves fund. Some quick back-of-napkin math shows we are leaving real money on the table in accepting this low yield, and for nothing in return, far as I can tell.
My first thought was to just get out of the Target Enrollment portfolios and construct a similar portfolio on my own using a handful of quality Vanguard funds (and critically, something 'better' for the stable value portion of the portfolio). However, to my dismay, I discovered this is not possible. All of the portfolio options in the Vanguard 529 plan use this Nevada Short Term fund for the cash equivalent portion of the portfolio. As far as I can tell, none of the options in the Vanguard 529 plan provide access to any of Vanguard's money market funds directly.
I fully understand that this is a 529 plan and my investment choices are limited to what this particular 529 plan chooses to offer, and I knew that when I signed up. No complaints there. This plan met our needs when we signed up, but I'm not sure it does any more. So I'm exploring our options.
My questions:
Thanks!
I'd like to get some input on either switching investments within Vanguard's 529 plan, or else switching away from Vanguard's 529 plan entirely and going with someone else. I've got two kids and VG 529 plans for each, set these up years ago mostly on autopilot and they are both currently invested in the Vanguard 'Target Enrollment' portfolios of the appropriate graduation years.
I recently made an unpleasant discovery about these portfolios, which is they have a large (and ever increasing) allocation to the Nevada Short Term Reserves Fund which pays a pitiful yield of ~2.6% (compared to Vanguard Money Market funds yielding >5%). For young families that are just starting out 529s this is mostly a moot point because they will have minimal exposure to this fund. However, our kids are approaching college age and after many years of diligent saving and investing these 529 plan accounts have healthy balances a large and growing (40->60%) portion of the balance is stuck in this lackluster Nevada Short Term Reserves fund. Some quick back-of-napkin math shows we are leaving real money on the table in accepting this low yield, and for nothing in return, far as I can tell.
My first thought was to just get out of the Target Enrollment portfolios and construct a similar portfolio on my own using a handful of quality Vanguard funds (and critically, something 'better' for the stable value portion of the portfolio). However, to my dismay, I discovered this is not possible. All of the portfolio options in the Vanguard 529 plan use this Nevada Short Term fund for the cash equivalent portion of the portfolio. As far as I can tell, none of the options in the Vanguard 529 plan provide access to any of Vanguard's money market funds directly.
I fully understand that this is a 529 plan and my investment choices are limited to what this particular 529 plan chooses to offer, and I knew that when I signed up. No complaints there. This plan met our needs when we signed up, but I'm not sure it does any more. So I'm exploring our options.
My questions:
- Has anybody else found themselves in this situation recently, and if so, did you make any changes as a result?
- Are there options within the Vanguard 529 plan that avoids this issue? Obviously if I can keep the accounts at Vanguard then that simplifies things, but I haven't been able to find any suitable options.
- Anyone have recommendations on a good 529 plan with more attractive stable value / cash equivalent options which are needed for families with college age kids? I haven't actively looked at 529 plans in many years (since I first set ours up).
Thanks!
Statistics: Posted by chiefBH — Sun Apr 07, 2024 12:31 pm — Replies 5 — Views 276