Mark Berg was recently quoted in a November 21 article in U.S. News & World Report. The article discusses how to maximize the federal tax benefits of 529 plans by 1) scheduling regular contributions 2) combining federal tax benefits with state tax deductions 3) not limiting investments during poor stock market years and lastly 4) before investing outside of 529 plans, consider the ramifications if taxes increase. Below is an excerpt from the article where Mark addresses the third point…
Avoiding contributing to 529 plans when the stock market dips could prevent investment growth. Berg says he was able to average 5 percent annual growth because he bought stock-based mutual funds at low prices when his other stock-based mutual funds were falling in price during the 2008 financial crisis. “There was no special trick to finding the funds, because generally stock prices fall in weak economies and rise again when the economy recovers,” Berg says. But he cautions, “Reinvesting in stocks should only be done if you have time before your kids enter college.” His kids were 6, 9, and 10 in 2008. The total tax savings is based on when parents withdraw the funds to pay for their children’s education, and not when they’re earning it, he says. Continual investing averages out in long-term investment plans, Berg notes.