Should I invest my bonus in my children’s 529 plans?


Q. I have saved $160,000 for two children who will go to college in two and four years. I just got a big bonus at work — $50,000 — and I’m wondering what I should do with it so it doesn’t hurt their financial aid. Should I add it to a 529 plan?
— Parent

A. 529 plans are a terrific way to save for college.

A first step would be to talk to a good college counselor and give them the specifics of your financial situation and get their thoughts.

“Financial aid is dependent on your income and assets,” said Jeanne Kane, a certified financial planner with JFL Total Wealth Management in Boonton. “It is possible that you may never qualify for aid or potentially you will. You need to start there.”

529s are tax-advantaged savings vehicles. The investment growth is tax-free if the funds are used to pay for “qualified education expenses” such as tuition, fees, books, supplies, and in some cases, room and board costs, Kane said.

“With just a few years to go before your kids are in college, you are in a place where the popular age-based investment options in 529 plans are becoming much more conservative, so you probably are not going to get much in terms of growth,” she said.

Age-based investment plans are more aggressive when the student is younger and adjust over time to become more conservative the closer the kids get to college, Kane said. The closer you get, the more you want to protect those funds, so the money is there for expenses.

Given your kids’ ages, the 529 plans are probably invested more conservatively so there won’t be that much growth. Instead, someone who looks at your overall financial situation and how much you expect college costs to be should be able to help guide you to make the best decision for this money, Kane said.

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This story was originally published on May 12, 2021. presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.