A rule designed to protect investors in 529 college-savings plans is having the unintended side effect of preventing them from shifting to more-conservative investments as the stock market swoons.
When Charles Strawbridge of Ashtabula, Ohio, got nervous about the markets this past spring, he wanted to boost the bond allocations in the 529 plans he had set up for his 16- and 19-year-old sons. But because he and his adviser, Matt Olver of Cleveland, had already changed his investment mix in January, he had to keep his current allocation of 20% and 25% in equities for his older and younger sons, respectively.
Now, after watching the accounts drop in recent weeks, he’s telling his older son — who is in the process of transferring colleges — to consider less-expensive schools. "We do have to keep in mind the downturn that the market has had on his available funds," says Mr. Strawbridge, a 55-year-old accountant. "It was unfortunate that we couldn’t have made the move. It takes a little bit off the table." Read full story. (The Wall Street Journal)