What exactly are your cash options within the current 529?
Our 529 is with New York. The TL/DR is there the "cash option" is not actually a cash option and performance is underwhelming.
The "cash" option is the Vanguard Short Term Reserves account. It appears to me a fund of funds that holds shares of Vanguard Money Market Fund, 'synthetic investment contracts' and funding agreements issued by life insurance companies - something I thought was a rather taboo topic amongst Bogelheads. Anyways, it's not FDIC insured and last year, performance has been underperforming it's benchmark - Money Market Funds Average, by about 200 bps! My guess is it's functioning similarly to a bond fund and performance is being dragged down by bonds/contracts that were issued during the low interest rate days. This may improve marginally as these contracts mature and the fund can repurchase at a higher yield.
I wish NY had a simple FDIC insured Money Market option but I guess not. To me, that means it is probably prudent to keep some college funds outside the 529 wrapper. This is what I meant about 529 plans being restrictive. You can actually be quite limited in you investment options depending on the state that sponsors your plan.
Statistics: Posted by Airmanf117 — Thu Aug 15, 2024 8:08 pm — Replies 14 — Views 796