If you are part of a family that is seeking to save for college in a hands-off manner, you may benefit from an age-based 529 plan. This is a type of savings account that automatically adjusts savings allocations based on the age of the individual that will use the money to pay for their postsecondary education. The age-based 529 plan is the perfect option for parents that want to experience a higher level of stability than that which is offered by investments in the stock market, but, have a higher growth potential than that offered by a traditional, interest-bearing savings account. In this college savings guide, you will learn important and relevant facts pertaining to the age-based 529 plans that are currently available for families that want to accumulate money for college.
The Age-Based 529 Plans – At a Glance
The age-based 529 college savings plans that are currently available are designed to assist families in saving for a postsecondary education. Typically, the plans are comprised of many different types of investments – each, of which, carry their own degree of risk. These investment types usually include savings accounts, mutual funds, and funds derived from bonds. As the child in which the account was set up for starts to age, the plan starts to reduce the higher-risked investments in an automatic fashion. These are usually investments that are based in the stock market and are called “Equity Investments”. In other words, the investments for a 10 year old child would carry a higher level of risk than the investments for an 18 year old.
One of the main advantages associated with age-based 529 plans is that parents have the unique ability to put cash into the account and, literally, watch the savings grow – with little to no effort. As the child ages, the portfolio of the plan will start an automatic shift from investments that are considered to be highly aggressive to investments that are considered to be conservative. There are several unique allocation packages that families may choose from. Once a package is selected, a specially-trained manager will allot the contributions made by the family to ensure the highest possible return on investment.
The End Result
When your family opts for an age-based 529 college savings plan, you will find that the ultimate objective of the investment is to experience capital preservation. As it comes closer to time for your child to enter into college, the asset mix of the 529 plan will become more conservative. This means that the heaviest of all financial allocations will likely be cash and bonds. If you want a hands-off approach, this is the optimal choice. The allocations of your investment into the age-based college savings plan are done automatically, at certain ages. This means that you do not have to worry about doing anything to steer the portfolio as the child grows. For more information on college savings plans, visit 529 College Savings Plan today!