Sometimes I get questions that everyone can benefit from knowing the answer. This blog post is included in a series of posts that’ll specifically answer questions that many readers would benefit from. This post answers the question – How do I allocate my kids 529 Plan?

The Question

Hi Rich,

Please see the Enrollment Year Investment Options/Multi-Fund and Individual Fund Options/Single Fund Option/Guaranteed Investment allocation options & Historical performance link.

Could you please provide suggestions for allocation percentages for the different performance options for the kids’ MESP account?


The Answer

There’s a long answer and a short answer. Skip to the short answer if you are pressed for time.

The Long Answer

Hi Neighbor

Investing is typically done 2 main ways: risk-based, or a combination risk/needs.

Risk-based is investing only based on your tolerance for risk. It says I cannot handle losing “x”, so don’t give me any more risk than that.

For example, I can’t handle it if my $10,000 goes down $1,500 or 15%. I’d pull my hair out.

In this case, I’d suggest a portfolio that had a risk level that would not go past 15% over 9 times out of ten.

Risk/Needs-based is based on getting a target return. It says I need “x” return and this portfolio gives me the best chance of getting that. The challenge is if you take more risk because you need more return, you expose yourself to a higher likelihood of failure.

To figure out your risk, here’s the MESP Risk tool

The Twist

College planning has a set timeline. In this case, your kids go to school in 2 and 8 years. So even if you can handle a lot of risk, it’s not wise to put money that’ll be used in 3 years or less in stocks. I typically recommend having any money to be used in 12 months in the Guaranteed Investments or Money Market. Anything to be used within 3 years in Fixed short-term bonds. And anything to be used from 3 to 7 years in the intermediate-term bonds. Anything past 7 years can be invested in equities or stocks.

The Challenge

The problem is one child is going to school in 2 years. Assuming she goes for 4 years, she has a 6-year timeline. That means she’d put everything in fixed. Any money to be used in her freshman year goes into short term bonds. The rest goes into intermediate-term bonds.

Child two goes in 8 years. Assuming she goes for 4 years, she has a 12-year timeline. Under my methodology, she’d put everything in equities because she goes after 7 years.

The Problem

The problem with this is that not everyone can handle 100% equities. Not to mention, people don’t have the time or wherewithal to figure out how much goes where and how to make adjust their plan every year.

The Short Answer

That’s why I recommend people use the age-based allocations. The 529 plan takes care of the rebalancing and removes risk as your child approaches college. Michigan 529 has taken that away. But they do have a tool to calculate the allocation based on the enrollment year. Here’s the allocation program for MI Saves –

Plugin the enrollment year and it suggests an allocation. Pick the funds that satisfy that allocation and you’re set.


College is expensive. College planning is complicated. Each 529 plan has resources to help you along the way. Some are better than others. If you’re not a DIY type of person, my go-to referral for all things college planning is Ann Garcia, CFP of She’s a fellow NAPFA member and her niche is college planning. She’s a great resource for a more in-depth discussion.

Rich Feight, CFP
Rich Feight, CFP

Hi, I'm Rich Feight I'm a fee-only Certified Financial Planner, successful business owner, and self-made millionaire that knows how to beat the system and become wealthy. I have a lot of clients that have done it too. I'm also pretty good at finding that ever-elusive work/life balance so many of us strive for. Lucky for you I have an abundant mindset and give all my knowledge away on my blog. So if you want to know what it takes to become a millionaire, follow me.