College isn't retirement.
When I talk about spending time in the stock market, I'm usually thinking about a 20- or 30-year runway. Retirement is open-ended. The timeline is long, the goal is flexible, and you can adjust course along the way.
College is different. The bill arrives on a schedule. You know, roughly, when it’s coming—and aside from taking on loans to cover shortfalls, you can’t defer it. My kids will likely start college in 2039 and 2044 (give or take a year). That’s not a guess; it’s a deadline.
That fixed endpoint should change how you think about investing your 529 plan. The basic framework is intuitive: own more stocks when your beneficiary is young, and shift toward bonds and cash as college nears. It sounds simple. It’s not.
If you've already read my pieces on the basics of 529 plans and Vanguard's lineup of college-savings options, you’ve done a lot of your homework already. This article is about the investment decision itself: how to think about it and, to put some real meat on the advice bones, what I'm actually doing with my children's account.
Spoiler: I've handed the ball to Vanguard—and I’ll tell you why that made sense for me, and when it might make sense to take it back.
How to Think About It
The basic rule is straightforward: aggressive early, conservative late. But that's only the starting point. The right answer depends on more than just the calendar.
Start with the goal.
Say you have $75,000 saved for a 12-year-old, can’t contribute any more, and need the account to reach $100,000 in seven years. Additional growth above $100,000 would be nice, but falling short isn’t an option.
Given today’s yields, high-quality intermediate-term bonds could plausibly return around 4.5% annually over that stretch. That gets you there. So maybe Total Bond Market Index (VBTLX) is the right answer—not because stocks are bad, but because you don’t need to take the risk of going for greater returns in the stock market.
Time horizon matters in another way, too. If your college-bound beneficiary plans to attend graduate school, some dollars will be needed now, and more will be needed several years down the road. That circumstance changes how you think about the entire 529 account.
The right answer can be found—but it’s personal. It depends on your timeline, balance, goal and willingness to accept risk.