May 18, 2024

529 College Plans Are Hit by Stock Market Turmoil

It’s also important, advisers say, to understand the details of how your 529 portfolio shifts holdings from stocks to bonds over time. Some plans may move money relatively abruptly, often around a child’s birthday, which can hurt returns if the move comes when the stock market is down. It’s preferable, and common, for plans to make the shift more gradually to reduce the risk of locking in losses.

Despite roiling financial markets and economic woes, there hasn’t been an apparent rush to withdraw money from 529 accounts, plan representatives say. But it’s also because families still see a need to save for college, despite near-term uncertainty about a move to online classes because of the coronavirus. That’s partly because if people spend the money for a noneducational use, they face income taxes and a 10 percent penalty on the earnings portion of the withdrawal.

“Nothing, in my mind, has changed significantly to make me want to adjust our strategy,” said one investor, Steve Blackmarr, a senior manager with Amazon Business Professional Services. He considers college savings a long-term investment, he said, and intends to keep saving for his children, ages 9 and 11.

Peg Creonte, head of government savings at Ascensus, which administers 529 plans in 26 states and the District of Columbia, said that while one-time contributions had fallen compared with last year, scheduled contributions mostly weren’t affected. “We did not see any sort of panicked reaction,” she said.

Utah’s my529 plan saw new accounts increase in early May, to 29 per day this year from about 16 per day last year, said Bryn Ramjoue, the plan’s marketing director.

  • Frequently Asked Questions and Advice

    Updated May 28, 2020

    • My state is reopening. Is it safe to go out?

      States are reopening bit by bit. This means that more public spaces are available for use and more and more businesses are being allowed to open again. The federal government is largely leaving the decision up to states, and some state leaders are leaving the decision up to local authorities. Even if you aren’t being told to stay at home, it’s still a good idea to limit trips outside and your interaction with other people.

    • What’s the risk of catching coronavirus from a surface?

      Touching contaminated objects and then infecting ourselves with the germs is not typically how the virus spreads. But it can happen. A number of studies of flu, rhinovirus, coronavirus and other microbes have shown that respiratory illnesses, including the new coronavirus, can spread by touching contaminated surfaces, particularly in places like day care centers, offices and hospitals. But a long chain of events has to happen for the disease to spread that way. The best way to protect yourself from coronavirus — whether it’s surface transmission or close human contact — is still social distancing, washing your hands, not touching your face and wearing masks.

    • What are the symptoms of coronavirus?

      Common symptoms include fever, a dry cough, fatigue and difficulty breathing or shortness of breath. Some of these symptoms overlap with those of the flu, making detection difficult, but runny noses and stuffy sinuses are less common. The C.D.C. has also added chills, muscle pain, sore throat, headache and a new loss of the sense of taste or smell as symptoms to look out for. Most people fall ill five to seven days after exposure, but symptoms may appear in as few as two days or as many as 14 days.

    • How can I protect myself while flying?

      If air travel is unavoidable, there are some steps you can take to protect yourself. Most important: Wash your hands often, and stop touching your face. If possible, choose a window seat. A study from Emory University found that during flu season, the safest place to sit on a plane is by a window, as people sitting in window seats had less contact with potentially sick people. Disinfect hard surfaces. When you get to your seat and your hands are clean, use disinfecting wipes to clean the hard surfaces at your seat like the head and arm rest, the seatbelt buckle, the remote, screen, seat back pocket and the tray table. If the seat is hard and nonporous or leather or pleather, you can wipe that down, too. (Using wipes on upholstered seats could lead to a wet seat and spreading of germs rather than killing them.)

    • How many people have lost their jobs due to coronavirus in the U.S.?

      More than 40 million people — the equivalent of 1 in 4 U.S. workers — have filed for unemployment benefits since the pandemic took hold. One in five who were working in February reported losing a job or being furloughed in March or the beginning of April, data from a Federal Reserve survey released on May 14 showed, and that pain was highly concentrated among low earners. Fully 39 percent of former workers living in a household earning $40,000 or less lost work, compared with 13 percent in those making more than $100,000, a Fed official said.

    • Is ‘Covid toe’ a symptom of the disease?

      There is an uptick in people reporting symptoms of chilblains, which are painful red or purple lesions that typically appear in the winter on fingers or toes. The lesions are emerging as yet another symptom of infection with the new coronavirus. Chilblains are caused by inflammation in small blood vessels in reaction to cold or damp conditions, but they are usually common in the coldest winter months. Federal health officials do not include toe lesions in the list of coronavirus symptoms, but some dermatologists are pushing for a change, saying so-called Covid toe should be sufficient grounds for testing.

    • Should I wear a mask?

      The C.D.C. has recommended that all Americans wear cloth masks if they go out in public. This is a shift in federal guidance reflecting new concerns that the coronavirus is being spread by infected people who have no symptoms. Until now, the C.D.C., like the W.H.O., has advised that ordinary people don’t need to wear masks unless they are sick and coughing. Part of the reason was to preserve medical-grade masks for health care workers who desperately need them at a time when they are in continuously short supply. Masks don’t replace hand washing and social distancing.

    • What should I do if I feel sick?

      If you’ve been exposed to the coronavirus or think you have, and have a fever or symptoms like a cough or difficulty breathing, call a doctor. They should give you advice on whether you should be tested, how to get tested, and how to seek medical treatment without potentially infecting or exposing others.

    • How can I help?

      Charity Navigator, which evaluates charities using a numbers-based system, has a running list of nonprofits working in communities affected by the outbreak. You can give blood through the American Red Cross, and World Central Kitchen has stepped in to distribute meals in major cities.


Alaska 529 has seen a “moderate” increase in people moving funds into less risky investments, said Lael Oldmixon, the program’s executive director. (Tax rules allow 529 participants to change their current investment options twice each year.) But she said people are not making major changes. “Families don’t want to touch that money.”

Here are some questions and answers about 529 accounts:

Cash is tight. Should I stop contributing to my 529 fund?

That depends on your circumstances. Andy Mardock, a financial planner in Bend, Ore., said clients typically placed a high value on college savings. But if someone has a loss of income, he said, and is faced with tapping emergency funds or using a credit card to cover basic bills, “the clear answer is to cut 529 contributions.”

Article source: https://www.nytimes.com/2020/05/29/your-money/college-529-plan-coronavirus.html

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