Ohio 529 Investment Line-Up Adds Target Enrollment Portfolio (TEP)
Ohio’s 529 Direct Plan, CollegeAdvantage, recently enhanced our portfolio options with a new way to invest for all levels of education. The new investment option, Vanguard Ohio Target Enrollment Portfolios, is a more flexible and simplified college savings approach, and is now available in which to save for a higher education.
What is a Target Enrollment Portfolio?
The Vanguard Ohio Target Enrollment Portfolio (TEP) is invested based on the date your beneficiary will begin using the funds for their higher education, whether at a four-year college or university, a two-year community or technical college, trade or vocational school, qualifying apprenticeship, or certificate program.
In a TEP, your savings are invested based on the date that the beneficiary of your Ohio 529 account will need the funds to start their higher education, which is usually at 18. For instance, if your child is entering kindergarten in 2022 and planning to enroll in college 13 years later, you would want to consider the 2034/2035 fund.
If you would like to view the Investment Option Chart, which illustrates the asset allocation within each Vanguard Ohio Target Enrollment Portfolios as well as the other investment options available in Ohio’s 529 Plan, this link will take you to it. If you would like to review the underlying investments within the Vanguard Ohio Target Enrollment Portfolios, this chart shows the asset allocation mix for each bracket of the expected years of college enrollment. This chart’s percentages are from March 18, 2022. These numbers will change quarterly as the each TEP continues on its planned glide path.
Advantage: Automatic allocation adjustments
One advantage of saving in a TEP is that no fund exchanges are required which will reduce market timing risk. While you are investing in a TEP, the portfolio will automatically adjust to regularly reduce the amount of risk in it in small increments. TEPs follow a smooth glide path asset allocation strategy, which shifts from investments that have more risk, like stocks, toward more conservative investments, like bonds and cash, as your beneficiary approaches the timeframe for post-high school education.
So, while your 529 beneficiary is young, their investments will be more exposed to fluctuations in the market, affording the ability to capture more growth from market upswings, while there is still time for investments to recover if there is an economic downturn. As your beneficiary grows older and approaches the intended timeframe for use of the funds, the asset allocation mix will adjust to reduce the amount of stocks and increase the amount of more conservative investments such as fixed-income and cash preservation options. This transition in asset allocations within the life of your account should help protect your contributions and earnings within Vanguard Ohio Target Enrollment Portfolios.
Advantage: Flexibility based on risk tolerance
Another advantage of a TEP is that you have flexibility to adjust the fund based on your risk tolerance. First, you should determine the year when your child will need the 529 higher education savings. With the earlier example, your current kindergartner would need the funds in 13 years, so you would look at the 2034/2035 TEP fund. You can then adjust the risk profile of your investments by moving up to a TEP fund with a later date for more equity exposure, or down to a TEP fund with an earlier college enrollment date for more fixed income exposure.
If you are opening a new Ohio 529 account, just select the fund that best fits your family’s financial needs and risk tolerance. For current Ohio 529 account owners, if you were previously in the former Vanguard Ready-Made, Age-Based Portfolio, after March 17, 2022 you were converted to a new Vanguard Ohio Target Enrollment Portfolio fund.
Current account owners can change the fund in which you were placed. However, you will need to use one of your two annual exchanges in order to move to a different TEP dated fund with a different risk profile. Please consult your own tax or legal advisor for advice.
Advantage: Simplified savings for a higher education
With Vanguard Ohio Target Enrollment Portfolios, it’s simple to set-it-and-forget-it. The TEPSs are comprised of passive-managed Vanguard index funds – stock, bond and cash reserves – to provide diversification at minimal investment cost. The portfolios adjust frequently on a glide path from a more aggressive to a more conservative mix as your child’s post-high school education nears.
You can use your TEP funds at any post-secondary education institute that accepts federal financial aid. This means your 529 higher education savings can be used at thousands of schools nationwide: from four-year colleges and universities, to two-year community or technical colleges, trade or vocation schools, apprenticeships, certificate programs, and graduate and professional schools.
It’s also simple to set up automatic contributions when you open your Ohio 529 account. With it, you can pay yourself and then your child’s future higher education first, rather than trying to set aside some dollars to contribute near the end of the pay cycle. Most account owners say it’s easier to set up the automatic contributions and then forget it. You can set these automated deposits according to your paydays or a monthly contribution schedule. Also, if you are opting to manually transfer money to your 529 account, you could just forget about contributing.
It’s also simpler to set up your family budget if you include 529 automatic contributions. Also, you’re sending your money where you want before any funds are siphoned off on all the other costs that unexpected show up between paychecks. The 529 savings add up even when depositing a small amount. If you’ve starting to save for college early in your child’s life, then you can start out with small contributions as you learn how to make your budget work.
If you have questions
The Ohio Tuition Trust Authority is committed to providing quick, friendly, and professional customer service through our Columbus, Ohio-based customer service representatives. If you have any questions or concerns about the upcoming changes, or if you need information or assistance with your account, please call CollegeAdvantage at 1-800-AFFORD-IT (233-6734). Our customer service representatives are available to assist you from 8:30 a.m. - 6 p.m. ET Monday through Friday. You may also send your non-account specific questions at your convenience via email to CustomerService@CollegeAdvantage.com.
Visit Ohio’s 529 Plan online to start saving today for your child’s future education. An investment in a 529 plan is an investment in your child where every dollar saved today is a dollar that doesn’t have to be borrowed later. A 529 account can be used for whatever school comes after high school. Learn, plan, and start with Ohio’s 529 Plan today at CollegeAdvantage.com.
Posted on April 18, 2022