529 - College Savings Plan Options

[cordata]

Here's a calculator to show the total returns of the S&P 500.


https://dqydj.com/sp-500-return-calculator/


Pick some 18 or 19 year range and see what you get.


And yes, my understanding is that the long term geometric return is around 6-7% including dividends.


And here's a chart of historical college tuition costs:


https://www.chronicle.com/interactives/tuition-and-fees


Get our good old UT Austin ... shows Tuition (Not room, board, fees, etc) as $3252 in 2000. For 2018 it shows $10,606.



Calculate the CAGR of this... 10606/3252 = 3.261 3.261 ^ (1/18) = 1.067 Therefore the cost of UT Austin tuition rose on average 6.7% per year over an 18 year period.

[kyam11]

If you are getting 6%-7% return you are doing very poorly.

A diversified portfolio of index funds over the worst 15 year period in history netted 5.22%. That would have been from March of 1994 to February of 2009. The chances of someone picking the exact worst time with no future contributions is very low. The median 15 year rolling period would be about 13.24% over a 15 year period. This is 100% equities.

If we look at a conservative 60/40 stock/bond split the worst 15 year rolling period is 5.35% which ironically would be from March 1994 to February 2009. Median would be 10.25% or so.

If you can't get over 6-7% investing you should not be doing it on your own.

Take that to 20 years and there has never in the history been a period that netted under 7% unless your diversification or choice of funds is poor. In the end if you diversify with multiple funds in various sectors you should net out no less than 8-9% long term.

[crazyforger]

What about Alaska's 529 plan.
I heard its good.

Did anyone try it out?

[dallas_cowboy]

Originally Posted by crazyforger

What about Alaska's 529 plan.
I heard its good.

Did anyone try it out?

I did compare and ended signing up Utah's 529 plan.

[crazyforger]

Originally Posted by dallas_cowboy

I did compare and ended signing up Utah's 529 plan.

Thank you!