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Effective May 21, Ohio’s 529 Plan now offers updated ready-made age-based portfolios that reflect college-savings industry standards of smoother glide paths. These changes were implemented May 18-20.
These updates will smooth out the larger age steps found in the glide paths of Ohio’s 529 Plan ready-made age-based portfolios. A glide path determines the asset allocation mix within an investment option. In an age-based portfolio, the mix is achieved through step-down age bands. As the beneficiary gets older the age bands allocation adjust to reduce the amount of riskier investments to more conservative ones. This smooth glide path is similar in concept to retirement target-date funds.
After these updates, CollegeAdvantage ready-made age-based portfolios will offer two variations on smoother glide paths.
First, the Advantage Age-Based Portfolio (AABP) will use a glide path based on the beneficiary’s college enrollment date, based on the beneficiary’s birth date. This enrollment date-based investment option will automatically reduce risk in the portfolio in small increments as the beneficiary ages. This change will more regularly reduce the risk within the college enrollment date funds, which allows the portfolios to better weather any market fluctuations.
The Vanguard Age-Based Portfolios will adopt a smoother glide path by increasing the number of age bands within each of the three risk tracks: aggressive, moderate and conservative. The age bands will increase from five to nine. The new bands consist of smaller age ranges, which will rebalance the asset allocation mix more frequently thus making a smoother glide path.
“We believe these changes will continue to make the CollegeAdvantage Age-Based Portfolios the most popular investment options in our lineup. Research shows account owners like the simplicity the aged-based options offer. The idea that the portfolio reduces risk the closer a child gets to college is very appealing,” said Tim Gorrell, executive director of Ohio Tuition Trust Authority, the state agency that administers Ohio’s 529 Plan.
These changes affect all account owners with age-based investment portfolios. However, there’s nothing for the account owner to do as their portfolio will automatically be mapped in the corresponding new option. For the 529 account owners in AABP track, they will be moved into a new fund based on the targeted year of college enrollment of their beneficiary. For those in the Vanguard Ready-Made Age-Based portfolio, they will be shifted into the correct age band based on their beneficiary’s age in their current risk track.
“Our goal is to make this transition seamless… our account owners need not worry about what to do, it’s all being done for you. It’s also good to know that this exchange does not count toward the twice-a-year exchange limit,” said Gorrell.
These updates only affected the ready-made age-based portfolios offered by Ohio’s 529 Plan. To learn more about all the investment options available with CollegeAdvantage, please visit CollegeAdvantage.com. Visit us online to open a 529 plan and start saving for future higher education expenses. Even small amounts can add up to big amounts over time by saving regularly. Ohio's 529 Plan, CollegeAdvantage, is your plan, your way.
Posted on May 22, 2018