529 Investments for K-12

The 2018 Tax Law allows up to $10,000 in funds each year from 529 plans to fund K-12 education.

The typical (most popular) investment options available in 529 plans for investing for college may not be appropriate because the time horizon for funding K-12 education expenses is shorter than funding for college expenses. A typical target date fund, a blend of equity and fixed income, may not be appropriate to fund a liability (like K-12 education expenses) that has a shorter time horizon.

One approach to funding K-12 education expenses is a liability-driven investment (LDI) strategy. This is an investment strategy based on using cash flows to fund future liabilities. For example, if you know today that the average tuition per year of private high school in your area is $15,000 then you may consider investing a lump sum in certificate of deposits (CD’s) and laddering them so you can receive more yield (return on your investment) than a money market fund.