Previous research has concluded that prespecified asset allocations used by many Section 529 college savings plans are suboptimal. We extend this research to show that though it may be true, it is true for reasons other than those asserted in previous research. In addition, it tends to deflect attention from other investment options and strategies.
JEL classification: G11, G20, G29
Keywords: asset, allocation, college, savings, taxes
The author thanks Dale Domian and Deborah Murphy for helpful comments and Ernie Evangelista, T. Shawn Strother, and Annie Tilden for excellent research assistance. The author also gratefully acknowledges the support of a University of Tennessee Finance Department Summer Faculty Research Award and a College of Business Scholarly Research Grant. The views expressed here are the author's and not necessarily those of the Federal Reserve Bank of Atlanta or the Federal Reserve System. Any remaining errors are the author's responsibility.
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