When Should You Move a 529 Plan to Cash?
One of the most overlooked risks in college planning isn’t market volatility.
It’s timeline mismatch.
Many 529 accounts are invested aggressively for years - which makes sense during the accumulation phase. But as college approaches, the objective shifts.
And when the objective shifts, the portfolio should too.
A 529 Plan Has Two Phases
Phase 1: Accumulation
Long time horizon
Growth-focused
Able to absorb volatility
Equity heavy allocations are appropriate
Phase 2: Distribution
Tuition bills have fixed due dates
Withdrawals begin
Recovery time shrinks
Volatility becomes risk
The mistake many families make is staying in Phase 1 allocations while entering Phase 2 in reality.
Why Market Returns Matter Less Near College
As college approaches, the question is no longer: “How do we maximize return?”
It becomes: “How do we ensure this money is there when needed?”
Over short windows - 1 to 5 years - equity markets can produce meaningful swings. A 15 - 20% drawdown is entirely possible within a year.
When tuition is due, recovery time is limited.
This is called sequence of returns risk - and it matters more in distribution than accumulation.
Risk Should Match Time Horizon
Risk is not inherently good or bad.
It is appropriate when:
Time horizon is long
Growth is necessary to meet goals
It becomes misaligned when:
Funds are needed on a fixed schedule
The goal is already within reach
Volatility introduces unnecessary stress
As the time horizon shortens, capital preservation becomes more valuable than incremental return.
A Structured Approach to 529 Allocations
There is no single “correct” allocation.
There is only the allocation that aligns with:
Timeline
Funding level
Risk tolerance
Emotional comfort
If you’re planning for college and want help starting a 529 plan or evaluate your current allocation, you can book an 80-minute Portfolio Review.
$285 | Focused | Scenario-Based | No product sales