Introducing the 2040 Advantage Age-Based Portfolio Fund
Ohio’s 529 Plan, CollegeAdvantage, offers many investment options, like our Advantage Age-Based Portfolios (AABP), which are a blend of actively managed and passive-index based portfolios. The AABP funds are based on your child’s closest projected year of college enrollment utilizing the his or her date of birth. For an example, if your child was born in 2011, you would be placed in the 2030 Fund. To see for yourself, here’s a link to Investment Option Choices chart.
The AABP college-enrollment date investment option allows your 529 dollars to stay in a single fund over the entire time horizon as your child grows up. Within the portfolio, the asset allocation will re-balance quarterly. While your child is young, there are more stocks (equity) in the AABP’s asset allocation mix. Equities, which can offer greater returns, come with more risk due to market volatility. The equity allocation is highest while your child is young so if there is an economic downturn, there will be more time for your college savings plan to recover.
As your child 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.
New AABP college-enrollment-date fund
Every two years, Ohio’s 529 Plan will add a new fund to the AABP. On July 31, 2020, CollegeAdvantage will add the 2040 year of college-enrollment-date asset allocation as the investment option for children born between Aug. 1, 2020 and July 31, 2022. Again, if you choose to invest in an AABP college-enrollment date fund, you will automatically be placed in the fund that aligns with your beneficiary’s birth date.
To review this new ready-made, college-enrollment-date portfolio, go to the Investment Option Choices chart.
Rollover of the AABP 2020 Fund To The Graduate Fund
Also on July 31, dollars invested in the 2020 AABP Fund will automatically roll into the AABP Graduate Fund. This will happen automatically and does not count as one of your two annual exchanges. Typically, students invested in the AABP Graduate Fund are of age to pursue post-secondary education. This fund is a heavily conservative investment option (only four percent of the fund contains equity) designed for families using their accounts to pay qualified higher education expenses.
Vanguard Ready-Made Age-Based Portfolios
Ohio’s 529 Plan also offers other ready-made, aged-based investment options. The Vanguard Ready-Made Age-Based Portfolios are passive index-based investment options that aim to match market performance while keeping fees low. These funds follow three risk tracks — aggressive, moderate, and conservative.
These investments have nine age bands, which will rebalance the asset allocation mix more often to create a smoother step-down glide path. As with the AABP funds, there is greater amount of equity in the younger age bands that methodically moves towards being more conservative as your child 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.
For a chart of the three Vanguard Ready-Made Age-Based Portfolios and the asset allocation mix within each age band, please review the Investment Option Choices chart.
Ohio’s 529 Plan tools and calculators
If you haven’t started saving in 529 account, Ohio’s 529 Plan offers calculators and tools to build a 529 plan that best fits your family’s needs. The cost of waiting tool can determine how much more money you’ll need to save to reach your college savings goals if you aren’t able to maximize the power of compound interest by saving as early as possible. With the college savings planner, you can input your own figures to receive an estimated monthly savings amount needed to reach your savings goals. Use this tool to vary the amounts of monthly contributions to see how setting aside a little more money can really add up. The tax benefit tool can illustrate how the 529 plan tax benefits can build the account when compared to a taxable savings account. Your asset allocation strategy is one of the most important investment decisions to make. The risk tolerance questionnaire helps determine what level of risk you’re most comfortable with in your investment strategy.
An additional tool: If you aren’t sure that you want to save in a ready-made, age-based portfolio that automatically adjusts the asset allocation mix as your child grows older, CollegeAdvantage also provides 529 account strategies designated by life stages, to show what to consider as your child grows closer to needing the 529 funds for their higher education.
Ohio’s 529 Plan, CollegeAdvantage, is well regarded within the college savings industry. In the most recent Savingforcollege.com quarterly analysis of 529 plan investment performances, Ohio’s 529 Plan is listed as first in the nation in five-year as well as the ten-year investment performance category. Additionally, Savingforcollege.com listed Ohio’s 529 Plan as one of its best-rated 529 college savings program across the U.S.
To learn more about all the investment options available with Ohio’s 529 Plan, please visit CollegeAdvantage.com. You can go online to open a 529 plan to start saving for your child’s future higher education expenses. Even small amounts can add up to big amounts over time by saving regularly. lf you’d like to learn more about 529 plans, explore Ohio’s 529 Plan —The Plan That Can — at CollegeAdvantage.com.
Posted on June 22, 2020