New Age-Based 529 Investments Available
Ohio’s 529 Plan, CollegeAdvantage, offers updated ready-made age-based portfolios that reflect college-savings industry standards of smoother glide paths. A glide path determines the asset allocation mix within an investment option.
For an age-based 529 portfolio, the asset allocation mix is achieved through age bands. When the beneficiary is young, there is more stocks (equity) in the portfolio. Why? Stocks are affected by market volatility; so if there is an economic downturn, there will be more time for the college savings plan to recover. As the beneficiary grows older, the mix adjusts with each new age band, reducing the amount of equity and increasing the amount of more conservative investments such as fixed-income and cash preservation options.
The Advantaged Age-Based Portfolios (AABP) and the Vanguard Ready-Made Age-Based Portfolios now include additional age bands. This change will allow the asset allocation mix to rebalance more frequently. Originally, Ohio’s 529 Plan ready-made age-based portfolios had larger age bands of three to four years. This kept the investment in one asset allocation mix for a long period in which to weather any positive or negative fluctuations in the stock market.
Advantaged Age-Based Portfolios
Advantage Age-Based Portfolios (AABP), a blend of active management and passive-index based portfolios, adopted new age-based funds based on the beneficiary’s year of college enrollment. This approach allows the 529 account to stay in a single fund the entire time as the beneficiary heads toward their higher education. Within the portfolio, the asset allocation will rebalance quarterly.
Every two years, Ohio’s 529 Plan will add a new fund to the AABP. In August, the 2038 year of college-enrollment-date fund will be introduced as the age-based investment option for beneficiaries born between August 1, 2018 and July 31, 2020.
Vanguard Ready-Made Age-Based Portfolios
The Vanguard Ready-Made Age-Based portfolios, passive index-based investment options, increased the number of age bands within each of the three risk tracks — aggressive, moderate, and conservative.
Previously, the Vanguard portfolios included five age bands. Now, these investments have nine age bands, which will rebalance the asset allocation mix more often to create a smoother step-down glide path. There is greater amount of equity in the younger age bands that methodically moves towards being more conservative as the beneficiary nears college. However, each of the three risk tracks — aggressive, moderate, and conservative — will decrease the amount of equity in the portfolio differently. For example, the aggressive age-based portfolio will retain more equity in the older age bands as compared to the conservative track.
“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 investment options were updates May 18-20, and were available effective May 21, 2018. For additional information, please review newly updated ready-made age-based portfolios on the Investment Option Choices chart.
To learn more about all the investment options available with Ohio’s 529 Plan, 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 June 13, 2018