During stock market swings, it’s completely normal, natural, and human to be worried about your savings and investments, including your 529 account. At Ohio’s 529 Plan, we understand wanting to protect what you have.

But we join our voices with many others: Please don’t make any hasty decisions. Swings in the stock market are normal and the market usually recovers over time.

You started your 529 savings plan with the long-term focus on paying for your children’s future higher education expenses. Keep your eyes on that goal. We know that every family’s situation is different but if at possible, please stay on your planned savings course.

If you feel like some modifications to your 529 are worth considering, here are some steps you can take to protect your 529 account.

Age-based options

Over half of current Ohio Direct 529 Plan account owners have chosen to save in age-based investment options. For Ohio’s 529 Plan, these options include Advantaged Age-Based Portfolios (AABP) and the  Vanguard Target Enrollment Portfolios. Both portfolios reflect the higher education savings industry standard of smooth glide paths, which determines the asset allocation mix within an investment option related to when the beneficiary will need the funds in their 529 account for their higher education.

An age-based 529 portfolio creates an asset allocation mix based on the 529 beneficiary’s current age. When the beneficiary is young, there are more equities, also known as stocks, included in the portfolio. As the beneficiary grows older, the asset allocation mix will adjust—usually every quarter—to reduce the amount of stocks in the portfolio and increase the amount of more conservative investments such as fixed-income and cash preservation options in it. These gradual asset allocation shifts can preserve the 529 funds as the start of the beneficiary’s higher education draws near.

A majority of current CollegeAdvantage account owners have opted to save in an age-based option. If your family is closer to using your 529 education savings account to cover higher education costs, the age-based portfolio has been transitioning over time to more conservative, cash preservation funds instead of equities. This can help minimize the impact of market volatility on the bottom line of their 529 account. If your beneficiary is young, while age-based options do contain more equities, your account will have time to rebound as markets recover.

If you would like to learn more about our age-based products, this article describes how these investment options work. 

Dollar-cost averaging

Dollar-cost averaging is a common investment strategy. With it, when you contribute regularly to an investment like a 529 plan, you will buy shares in it when the costs are higher as well as when the costs are lower. Let’s say you are contributing $100 a month to your child’s 529 account. When the market is up, you purchase less shares with the same dollar amount. In a time like this, you can purchase more shares with the $100 monthly investment while the market is down. This process can allow you to end up with more shares of these investments at a reduced cost. When the stock market stabilizes, you will likely have more shares in your 529 plan that is ready to grow.

If you are able to continue contributing to your Ohio’s 529 Plan now, you will still be able to take full advantage of the up to $4,000 state income tax deduction to help your bottom line during next year’s tax season.

Need to make a 529 withdrawal soon?

If your child is currently working on their higher education or will be starting this fall, we understand that the current market may be worrisome. There are some alternatives to consider while you wait for the stock market to settle.

1. Hold off tapping into your 529 plan to allow time for the markets to recover. Use other resources or other savings to cover the first round of higher education payments. If your child received Pell Grants or financial aid, use those funds first as they do not have to be repaid.
2. During this time at home, have your student apply for more scholarships. There are many free resources that collect scholarship information, like Sallie Mae Scholarship Search, FinAid, and FastWeb. On these sites, your child would create a profile with their academic scores, community service and volunteering, athletic and academic activities and they will be matched with scholarship applications for which they are eligible. You can also learn more by visiting Federal Student Aid, an office of the U.S. Department of Education. This is the federal agency for which you will complete the Free Application of Federal Student Aid (FAFSA), to determine how much federal financial aid your student may receive. The agency also offers guidance on scholarships, including what other sources to tap for more information, including the free scholarship search tool from the U.S. Department of Labor. FinAid also curated a list for the more unusual scholarships that are available. Sallie Mae also offers the Paying For College Resource, which assembles free tools, videos, and checklists to keep you on track while preparing for your children’s higher education
3. Select a less expensive school option. As an alternative while you allow your finances to rebound, talk with your student about the practical costs of college and attending a school or program with lower tuition costs. Community colleges are an excellent option to use your 529 plan, where your student can start their higher education at a lower cost.  If your student wants to attend an out-of-state school, look at in-state options to reduce expenses. Or consider having your student stay at home while in college to reduce room and board expenses.

We cannot and do not provide investment advice, so you should consult your financial advisor or tax consultant about your personal situation and savings goals.

Visit Ohio’s 529 Plan online to start saving today for your child’s future education. A 529 account can be used for whatever school comes after high school, including four-year colleges and universities, two-year community colleges and technical schools, trade and vocational school, certificate programs, or apprenticeships. Learn, plan, and start with Ohio’s 529 Plan today at CollegeAdvantage.com.