I guess I’m not going to front-load DC2’s 529?

I’d been waiting for our emergency fund to refill after all of the big expenses we had had.  (March has been so long that I don’t even remember what the last big thing was… I mean, I know we hired a handyman to fix some stuff because I haven’t finished that post yet, and I know we bought a car this summer, paid for lots of summer travel and camps that probably won’t happen now, maybe it was front-loading DC1’s 529… probably that.  Bad market timing there, eh?  Shoulda kept dollar cost averaging!)  Since our tax bill and estimated taxes ended up being a wash again this year, we’re back to having more money than we need for the long unpaid summer.

I still don’t know how much college is going to cost for DH’s relative’s kid next year.  They weren’t clear about if the number given was just for summer semester (which they mistakenly put down as the first semester of attendance) or the full year or what.  They also didn’t know if that number included loans etc. etc. etc.  So they were going to move his start to the Fall with everyone else and then get the page with the full work-up of the costs to us.  That hasn’t happened yet because the ‘Rona shut the university down and so on.

In any case, I’m hoping he’s still planning to go in the fall [update:  currently unlikely– he’s moved out and may not finish high school] and I’m thinking that selling stocks is not such a great idea right now, even if they’re only down to 2017 levels.  So instead I’ll keep stockpiling in cash.  There seems much less of a reason now to try to figure out where to put money.  I can’t predict the future, but I somehow doubt we’re in a temporary market low that will immediately zoom back up making me regret not having invested more than our usual right now.

Potentially excess money can sit a while in savings until we find out whether or not it will all be turned into tuition next year or regular spending if DH gets laid off.  We can re-evaluate on frontloading DC2’s 529 in the future, and in the mean-time we will continue to put $750/month in there.

All the good personal finance bloggers out there will say stay the course, and we are… I’m not dropping 403b/457/regular 529 investing.  But I’m also not looking at this as a huge opportunity to get in the market.  Who knows how long the recession will last.  Maybe things will bounce back after a vaccine is out.  But maybe all the things that the Trump administration did to hurt the economy will be exposed and it will be a while before we dig out of this one, just like with W’s recession.

Are you changing any money plans because of the pandemic/upcoming recession?



30 Responses to “I guess I’m not going to front-load DC2’s 529?”

  1. Katherine Says:

    We are contemplating financing a new car, if the model we want gets a 0% financing offer and we can get a good price because the economy is bad and car companies are getting desperate. Normally we’d pay cash and delay the purchase as long as possible, but these are unusual circumstances.

  2. EB Says:

    I have a theory about encouraging young people who weren’t terribly engaged in high school to enroll in college. This is based on a large sample of young people (my husband’s relatives)who grew up in a region where, previously, you became an adult by going to work in the mine or the pulp-cutting industry or non-BA requiring public employment, at the age of 18. There is still a real sense, among the young people of this generation, that it’s more important to become an adult (i.e. go to work) than it is to continue to be a child (i.e. a student). They do enroll in the local directional state college,, many of them, but it doesn’t seem to stick. They drop out in order to go full-time in their low-paying jobs (there are no mining jobs any more). Of course there are exceptions — and these tend to be young people with a specific occupation in mind — RN, criminal justice, elementary education, HVAC technician, natural resources management, etc. So I’m starting to think that the main thing is to work with HS students who fit this profile to identify an occupation that they feel attracted to, and help them figure out how to pursue it, whether it involves college right away or not.

  3. Steph Says:

    I haven’t decided what to do about my Roth IRA for 2020. I have money to max it out, and had planned to do so this month. A low point in the market also feels like a “good” point to invest (even if I feel vaguely guilty about having that privilege). However, I’m still nervous about my job for this fall, since so many universities are freezing hiring – I’m still a little nervous that my new college will try to push back my start date or cancel my job. So part of me wants to keep it liquid until summer, just in case.

    • nicoleandmaggie Says:

      I guess you could put it in their version of a savings account instead of the market and take it out of your job has problems? That adds some additional paperwork/tax hassle, but in an emergency…

  4. CG Says:

    DH keeps putting cash into the market when it drops and the market keeps dropping…oof. Luckily we won’t need those retirement accounts for a long time…

  5. bogart Says:

    I’m not confident of my job security, as a reasonably well paid staff person at an expensive private university whose administration is freaking out right now. I have sufficient job security that they can’t just box up my stuff and walk me out the door, but insufficient job security to feel confident I won’t lose my job. On the bright side, DH’s income (pension, SS) is entirely passive. So the short answer is we are not changing investing, etc., approach for now but I am looking for places to cut costs (this is reasonably straightforward, as big uses of our not-tremendously lavish discretionary spending have been gasoline — I mean, not that that’s usually exactly 100% optional but we are using much less of it right now — meals out, and travel) and considering delaying big purchases. I want to get a second driveway put in, leading to the lower entrances to our home, and a fireplace insert. We may do the second, as I don’t want to go through another winter, particularly a coronavirus winter, with no way to heat our home if we lose power, but it’s less obvious this is a good plan.

  6. Michael N Nitabach Says:

    For yearz we’ve been musing about how vast majority of our savings are invested too conservatively (a lot of cash equivalents & bonds; almost no equities). Now it all looks good! I guess the lesson is no matter what yr investment strategy, if you wait long enough it’ll eventually be suited to current conditions!

    • nicoleandmaggie Says:

      Except it probably wasn’t good– you’re probably still worse off than you would have been when a mix of investments suited to your distance from retirement! (Ex. A target date fund)

      • Michael N Nitabach Says:

        Yeah exactly. It wasn’t good for a long time but now for the moment it is good.

      • nicoleandmaggie Says:

        Except that you still have less money even with the drop than you would if you’d been doing appropriate investment.

      • Michael N Nitabach Says:

        Yes, that is exactly what I’m saying. Our investment strategy (more like path of least effort/resistance) meant that over the last decade we obtained substantially lower returns than we should have. But as we sit here right now today, being in cash & bonds is good for the moment (assuming that when the reality of the global demand collapse & its resistance to temporary fiscal bailouts hits, risk markets will crater even further), and I’m happy to not have risk asset positions to worry about. I am not saying that I’m happy our investments substantially underperformed for the last decade; I’m saying that I’m happy to be in cash & bonds right now and not risk assets.

      • nicoleandmaggie Says:

        So you’re happier having fewer assets now and always?

      • Debbie M Says:

        Probably. Now he’s not freaking out and selling low, so it’s good for him.

        Similarly, we’re happier dealing with much steeper plummeting on a regular basis.

        We’re all irrational in our different ways and just have to do the best we can with who we are. As it says in chalk on a sidewalk near me, “Six feet apart, you’re still in my heart.”

      • nicoleandmaggie Says:

        I guess if you’re super high income you can afford to not make much on your savings if you have a target savings number, and that number will have less variance with bonds (the certainty equivalent will be smaller). But don’t mistake that for having lower savings look like the smart thing to do—with long term investing the smart thing is still to follow a stock bond mix adjusted for age or when you think you’ll be drawing from it. High bonds portions are good closer to retirement but not great when you still have decades, no matter how the market is doing at any point in time.

      • Debbie M Says:

        Also, so many people saving nothing at all unless they buy a house and have forced equity build-up. And especially at the beginning, the amount you’re saving is so much more important than the amount you’re earning. You have time to build up your defenses against your fears of stock crashes. (I started by reminding myself that all through history, you basically never lost more than half your money if you’re diversified. So instead of investing just the amount I could afford to lose, I started investing twice the amount I could afford to lose, ha ha!)

        (I of course agree with you on your main point.)

  7. Debbie M Says:

    I’ve rebalanced two months in a row. (I check the standard deviation on my different index funds every month to make that decision. I usually rebalance about every eight months.)

    Of course the free $1200 is new. I don’t need it any more than I needed it last year, but I’ve decided to pass on half of it somehow–still working out how. I have a blog post with some of my brainstorming on that so far: https://livingdeb.dreamwidth.org/510825.html

    Even before I heard about that check, I’ve been trying to figure out ways to reduce the economic suffering of some people:
    * I’m still eating out once a week, but doing take-out, which is way less fun. We were mostly going to local mom-and-pop places, but now we’re going *only* to the mom-and-pop places. Except La Madelleine is probably luring us with their BOGO sandwiches and $1 donation cup of soup.
    * I’ve been adding a $2 hazard pay to all my tips.
    * I’m thinking of buying some self-published books I like for myself and friends.
    * A friend is making face masks to sell. I keep thinking I should make some too for myself, but I also like the idea of supporting her.
    I’m not a very good consumer, and I really can’t afford to be, so this won’t add up to much.

    I always think about buying I-bonds with part of my income tax refund, but I’m pretty sure this year’s will suck, so that’s off.

    And I’m probably going to apply to work with elections in case they suddenly need a lot more more ballot-by-mail workers than usual.

  8. Revanche @ A Gai Shan Life Says:

    Relatively minor changes. I was going to carry on my usual weekly investing but I realized that I’d feel much better having cash on hand to cover at least a year of both our expenses and our rental’s in case our tenants need rent assistance. We’re most of the way there, I just hadn’t intended to do this out of pocket because the rental was supposed to at least cover its own costs long term but it’s in the hole now. I might as well throw more personal money at it to make sure we can keep being decent humans should they need the help and not have to worry about how we’ll pay our bills. This would be a lot harder if we weren’t both still working so I’m grateful we have the two paychecks to pull together the extra savings.

    I’m putting our weekly investing on temporary pause while I figure out whether I want to focus 100% on building the rest of that buffer or go 50/50 with saving and investing. I don’t like to miss out on the lower prices but I also doubt we’ll be bounding back from these lows in a couple months so it’s probably not going to be a huge missed opportunity. Who knows, though, I’ve never been any good at market timing!

    • nicoleandmaggie Says:

      That’s kind of how I feel– with the uncertainty it’s nice to have cash on hand. Also market timing is impossible! Even when you know you’re in a bubble you never know when it’s going to pop and you never know when the market will bubble up again. If things were actually rational it would be easier to say, oh, Trump is president, this is not going to end well, but I never would have predicted it would take over three years for the bottom to fall out. How long this recession lasts is going to depend a lot on public policy, but the stock market part will be both public policy and the same people who created the last bubble. And of course, the federal reserve is limited in what they can do now since they’ve been keeping rates so low even with the stock market bubbling. An unpredictable mess!

      But yeah, I doubt we’ll be seeing much rebounding until a vaccine is developed given our terrible federal policy around the pandemic.

      • becca Says:

        Out of curiosity, when you say you don’t think it’s going to be a quick rebound once we’ve got a vaccine, how long do you think it takes to get a vaccine?

        Also, is there a Sage Economist Reason to expect this can’t get worse than the Great Depression?

      • nicoleandmaggie Says:

        When I say rebound I don’t mean up to 2019 levels, I mean the direction will be up instead of flat or down, meaning time to go back in the market for people with hindsight/crystal balls. (Everyone says 12-18 months for a vaccine, right?)

        Our monetary policy is better now than it was during the Great Depression. We may (will probably) have unemployment that bad but hopefully not so long a time period. I dunno… I’m no good at predicting macroeconomics and what the government does is really important and currently unpredictable.

      • becca Says:

        I think if we’re lucky, 12-18 months could be when we see a vaccine for healthcare provider use, specific essential workers, ect. The fastest record I can find for a drug phase I-> approval is 20 months (Harvoni for hep C- and I’m not even sure that’s accurate). Typical drug and vaccine development timelines are 10 years. With Manhattan project level resources, on a dozen trial vaccines, we might be able to hit 12 months. We are not doing that.

        I don’t think we get out of this mess with a vaccine. If we get a vaccine quickly, it might be flu-vaccine level efficacy (don’t get me wrong, if I could come up with moderately good vaccine like that in 12 months for this, or anything else, I’d consider my life in immunology not to have gone to waste. But the lack of long term antibodies in people with SARS suggests we are not going to have a chickenpox kind of immunity here, where the norm is one infection and lifetime protection).

        All of which is to say, I don’t think we get out of this with a sense of safety (unless Covid19 goes the way of SARS, which is what I’ve hoped for all along). And that will impact human aspects of the economy (maybe low consumer confidence, fewer people investing in the stock market).

      • nicoleandmaggie Says:

        Well, that’s depressing.

  9. I guess I will front-load DC2’s 529 too? | Grumpy Rumblings (of the formerly untenured) Says:

    […] 529 we kept investing in monthly as before.  I guess we’d decided not to because we were expecting to pay for DH’s […]

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