This past weekend, my oldest child selected the college he will attend. Based on the school's scholarship offer to him compared with its cost of attendance, our total out-of-pocket costs over four years are expected to be around $126,000. I can project those costs with a reasonable degree of certainty because that school uses "cohort-based pricing," which will fix many of his costs over a standard college enrollment window.

My wife and I had established a 529 college savings plan for him shortly after his birth, and we have been regularly investing in that account for him since then. By an amazing coincidence, the same weekend he made his decision on which school to attend, that 529 account balance clocked in within rounding distance of that amount.

As a result, shortly after he committed to the school, I issued a request the 529 plan custodian to liquidate the stock-based funds it had been invested in. Rather than continuing to take on market risk, I transferred the entire account balance into certificates of deposit (CDs). My rationale was simple: I had won the game of investing for his college education, and so it became time to quit playing that game.

A child putting a coin into a piggy bank labeled "college."

Image source: Getty Images.

Why stop investing aggressively?

There are a few key reasons behind that decision. First and foremost, as 2022 showed, stocks can go down as well as up. The CDs that 529 account is now invested in are FDIC insured, so for them to lose money, we'd likely have a major national financial catastrophe on our hands. Since that account balance is now enough to cover his expected out-of-pocket costs, why take more risks with that money than we strictly need to?

Second, 529 accounts are special purpose accounts. They're primarily there to help cover college education costs. Using the money for a non-permitted purpose brings with it a penalty as well as taxes on the withdrawals. While new rules will allow some leftover 529 money to be put toward a Roth IRA, the reality is that there are simpler ways with fewer strings attached to help fund retirement should we choose to do so.

Third, as a general rule, money you know you need to spend in the near future does not belong in stocks. This is because the bills will come due no matter how the stock market happens to be performing. If the money isn't available exactly when it needs to be, the consequences can be severe. In addition to penalties, fees, and interest, for instance, non-payment of college-related costs can prevent things like registration for the next set of classes. 

Put all the factors together, and the certain benefits of having enough cash when it's needed simply outweigh the possible benefits of potentially winding up with more if all goes well in the market.

Smart asset allocation is part of any worthwhile financial plan

The reality is that we are all saving and investing for goals. Sometimes it's retirement. Other times, it's college education. Still other times, it's simply to have a financial security blanket just in case of a stint on the unemployment lines. To make the best use of your money, you need to understand what you're saving for and when you might need to tap that money for its intended purpose.

With those factors in mind, a smart asset allocation strategy can help you assure that when it comes time to spend on your goals, the money you've accumulated can still be there for you. In the end, that's just as important as saving your hard-earned cash when it comes to being able to benefit from the sacrifices you made in order to invest in the first place.

Make today the day you sit down and look at what exactly you're saving and investing for. If you find yourself with enough to reach at least one of your goals, recognize that reality and celebrate it. Then, give yourself permission to take money off the table and actually enjoy what it is that you've been saving and investing for.

After all, once you've won the game, it really is OK to quit playing it.