How Have 529 Investing Options Changed In Recent Years?

February 10, 2022

The greatest investment that one can make is in one’s own education and the education of your children. The dividends that education pays cannot be matched by anything else in society. Thus, good parents always want the best possible education for their children, and that is why many of them opt for a 529 savings plan.

What Are 529 Savings Plans?

The 529 savings program has existed in most places for a long time. The concept is meant to help parents start to build savings for educational expenses that their children will have down the road. The idea is that it is better to get ahead of the rising cost of education by planning and saving for it now rather than putting it off and hoping for the best down the road.

These savings plans have always had tax benefits for those who save in them, but their uses were previously rather limited. Parents could pull the funds out to help pay for their child’s post-secondary education, but they were not allowed to use the funds to help pay for K-12 schooling. However, with the changes to the tax code that took effect following the passage of legislation in 2017, 2019, and 2020, some of the limitations that once existed are now gone.

How Have 529 Savings Plans Changed?

Recent alterations to the way that 529 savings plans are structured have provided enormous benefits for those who sock away money into these plans. Some of the changes as explained by include:

  • 529 savings plan money can now be used for K-12 educational purposes
  • Plan money can now be used to pay off some student loan debt
  • Grandparents who set up the 529 plan can also get a tax break (previously this was restricted to parents only)

These changes might appear small to some people, but they are monumental to those who have worked so diligently to save money for their children’s educational needs. They care deeply about how the government handles their money, and they are pleased to see that some of these changes will surely positively impact their lives nearly immediately. It is fair to say that most of these changes are quite popular with those who already have 529 plans.

Investment Options Within 529 Plans

The only way to grow your money is to have 529 investment options that are performing strongly. Each individual state sets up its own plans that provide its participants with a variety of options that they can select from if they want to get involved. For example, we will first look at what is known as age-based 529 investment options in the state of Tennessee. offers a solid definition of what these plans are:

Sometimes referred to as the enrollment-based option, this is an investment approach where your asset allocation is programmed to change over time. Accounts for young beneficiaries are invested aggressively and accounts for beneficiaries with college right around the corner are invested much more conservatively. In some 529 plans, the age-based option operates by automatically transferring your investment from one static portfolio to another at certain points in time.

In essence, what this means is that those who select to invest based on the age of their child are choosing a strategy that is indeed to provide the most stable returns for any account based on how close the child is to being ready for college. If they are younger, then the plan invests more aggressively in the hopes of earning outsized returns early. As the child nears college age, the plan eases off the riskier investments and starts to invest more conservatively. Here are some of the 1-year performance markers for different age groups in the Tennessee 529 plans:

  • Age Based 0-2:  28.75% return
  • Age Based 3-4:  24.73% return
  • Age Based 5-6:  20.80% return
  • Age Based 7-8:  16.83% return
  • Age Based 9-10:  13.18% return
  • Age Based 11-12:  9.65% return
  • Age Based 13-14:  6.23% return
  • Age Based 15-16:  3.20% return
  • Age Based 17-18:  1.80% return
  • Age Based 19+:  0.86% return

Things don’t always line up so perfectly along age lines like this, but with the booming stock market that the country has enjoyed over the last many years, that is exactly how things have turned out in this period of time. The more aggressively balanced accounts (i.e. those of the youngest age groups) are enjoying the largest returns in this climate.

There are other 529 investment options for those who don’t just want to do an age-based “set it and forget it” approach. Tennessee also offers plans such as:

  1. TN Real Estate Fund (33.19% return one-year performance)
  2. TN Total Stock Market Fund (31.84% return one-year performance)
  3. and the TN Balanced Fund (20.05% return one-year performance).

This is just a small sampling of what is offered in Tennessee, but it gives you an idea of what kind of options are out there for those who really want to get into the weeds and work diligently on their child’s 529 savings plan.

While we covered the offerings specifically for the state of Tennessee as an example, there are similar offerings across all of the states. If you look around at what is out there, you will soon discover that there is a whole world of investing options waiting to be discovered. If you have a little time on your hands and want to make sure your 529 accounts are properly balanced, consider looking through the available options today.

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