529 Plan Strategies For A Stock Market Drop

The stock market’s recent decline has left many families wondering how their 529 plans will be affected. With tuition costs rising and investments fluctuating, parents and grandparents may feel uncertain about whether to stay the course or make adjustments. The right strategy depends largely on how soon the funds will be needed.
529 plans are designed to grow over time, but when the market experiences a downturn, it’s natural to reconsider investment choices. Should families move to more conservative assets to protect their savings, or should they ride out the volatility?
The best 529 plan investment strategy varies based on whether college is more than a decade away, just a few years off, or right around the corner.
If your child is still in elementary school or younger, market downturns shouldn’t cause panic. With more than a decade until college, there’s plenty of time for investments to recover. Historically, the stock market has rebounded from corrections, often within a few years.
For families with children in middle school, the balance between risk and reward becomes more important. With a shorter time horizon, heavy stock exposure can lead to volatility, but there’s still room for market recoveries.
Families with students in high school or about to start college should prioritize protecting funds already saved. With less time to recover from market dips, a cautious approach can prevent losses from impacting tuition payments.
A declining stock market doesn’t mean families should panic, but it does call for a smart strategy. Younger children’s 529 plans can stay invested to recover losses, middle schoolers’ plans should shift gradually to reduce risk, and high schoolers’ savings should focus on preserving funds.
However, we don’t recommend even high school families go “all cash”. There’s still time between now and future years of college, and you could be costing yourself significant growth if you sell all your investments.
By making adjustments based on a child’s college timeline, families can protect their investments while ensuring funds are available when needed.
Staying informed and reviewing your plan’s investment options can help you navigate market downturns with confidence. If you’re not sure how to monitor your investments, check out our favorite portfolio tracking tools.
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