Some 529 college savings plan holders are discovering that restrictions on asset allocation moves are limiting their ability to respond to plunging stock prices.
The problem has come about because of an Internal Revenue Service rule that prohibits 529 plan investors from changing their investments more than once a year, according to The Wall Street Journal.
The IRS imposed the rule to stop 529 account holders from making investment changes on a whim, but the Journal is reporting that the rule has forced some 529 plan holders to watch education savings dwindle as the stock market tanks.
The Journal describes another investor who said she is considering pulling all of the money out of the 529 plans she set up for her 2 sons, even though withdrawing the money would subject it to IRS penalties.
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