Revolutionizing My Son's 529

By BussTechno | BussTechno | 29 Apr 2021

For those unfamiliar with a 529:

In the U.S. a 529 plan is a tax-advantaged account that can be used to pay for qualified education costs, including college, K-12, and apprenticeship programs.  It is an after tax account that grows and can be withdrawn without tax penalties as long as it is used for the above qualifying expenses.

I have been investing monthly in my son's college fund since he was born into a guided 529.  I have never liked the fact that it was not a self-directed investment vehicle and this particular investment lowers its risk profile as he ages. Earlier this month I decided to take some of the principal balance out of his 529 to invest in the crypto market in order to maximize returns for HIS future.  If you are unaware, in the USA you can take principal out of a 529 without incurring any tax liability as it is after-tax money.  My son is 5 and can stand to have more "risk" in his portfolio- I would argue that with the massive international quantitative easing and money printing that continues to occur there is more risk to the future value of his portfolio by adhering to traditional portfolio management/theory.  It is why I have moved a large portion of my own assets into cryptocurrencies and real estate.

I believe much better returns and a hedge against future inflation is found in cryptocurrency. Additionally I foresee my son's adult life being ran on digital currencies; like all parents I want to give my child the best head start I am able to give.  

Now, before anyone starts lecturing or b!tching about irresponsibility on my part for risking my son's college fund, know this:

  • This is his college/future fund
  • I am attempting to ensure the returns are much better than he is currently getting (currently about 9% annualized)
  • The crypto will become his when he is mature enough to accept the responsibility
  • I have already transferred my GI Bill from my military service to him (that will pay for his tuition, books, fees, and give him a monthly stipend) so he will never have to worry about paying for college if he chooses to go
  • I will only invest in Top 15 cryptos
  • I continue to put money into his traditional 529

So with that being said, below is the starting plan for my son's future, there will be a minimum of 13 years before he receives it (could be longer based on his maturity):

Initial Allocation: $5800

Bitcoin:          40%     $2320

Ethereum:     25%     $1450

Cardano:       10%      $ 580

Polkadot:       10%     $ 580

Binance:          5%     $ 290

ChainLink:       5%    $ 290

Solana:            5%    $ 290  

Wherever possible I will stake the crypto in order to earn dividends and add to his bags.  Very limited trading will ever occur for his account, only something disruptive in the crypto world will change the contributions/allocations.  This limited activity is mainly because once the funds were removed from the 529 they no longer have the tax advantages.  Hopefully in the near future we will have 529 plans that cover crypto- in which case a portion may be moved back under that tax protection.

The timeline for these investments is at least 13 years and stated previously I will only be placing Top 15 by Market Cap coins in the account. I want to be able to give my son something more substantial than $20-25K to start his life.  We already teach him basic age-appropriate finance lessons and they will continue to expand as he grows older.  Hopefully by the time he is ready to leave for college or strike out on his own he will be armed with the knowledge of how to grow and make his money work for him. 

I'm not going to try to forecast where I think his account will be when he is ready to take control, but if history is any indication I am certain it will beat his current returns by magnitudes.

Not that it will dissuade me from acting on my plans, but feel free to comment below and let me know what you think.  What are your plans for your kids/family?  As always, thank you for reading and give a thumbs up if you enjoyed the content.

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