Understand the performance of the 529 plan you select in Utah can make a huge difference in your returns. Learn more about Utah's 529 plan performance.
Picking the right 529 plan for your family will force you to consider a wide variety of factors, but arguably the most important one is the performance of a particular plan. After all, it’s the tax-free returns on your investments that make the 529 plan so valuable as a tool for financing college, so the greater the returns, the more useful the account. As one of the most popular types of 529 plans available today, Utah’s my529 plan has drawn high praise from many of the organizations that rate these accounts’ performance trends, but what exactly does the performance trend of Utah’s 529 plan look like? To find out, keep reading as the experts at Sootchy answer this critical question.
One of the most popular investments with Utah’s 529 plan is the age-based option, which adjusts asset allocations over time in an effort to preserve any gains when college rolls around. When the beneficiary is young, investments in the account can be more aggressive (and therefore more profitable), the risks of which are mitigated by the fact that account owners have plenty of time to make up losses. As the beneficiary approaches college age, however, they shift toward more conservative investments to preserve the balance of the account.
As a result, the performance trends for age-based 529 plans in Utah are generally separated into age groups, with greater gains and losses happening earlier in the beneficiary’s life. The performance of an account can also vary based on the level of overall risk the account owner has chosen. Utah offers four to pick from: aggressive global, aggressive domestic, moderate, and conservative.
Below, we’ll lay out the age-based performance trends with Utah’s my529 plan through October 2020; these numbers are based on the five-year averages for returns on an account in the “moderate risk” category with an initial $10,000 deposit.
Ages 0-3: 8.01%
Ages 4-6: 7.99%
Ages 7-9: 6.94%
Ages 10-12: 5.80%
Ages 13-14: 4.81%
Age 15: 4.30%
Age 16: 3.42%
Age 17: 3.25%
Age 18: 2.74%
Ages 19 and up: 2.14%
As you might imagine, accounts with riskier investment strategies can also provide greater returns; the “aggressive domestic” category, for instance, returned an average of 11.41% over five years for beneficiaries ages 0-3, while the “conservative” category saw returns of 6.81%. However, greater gains are sometimes offset by greater losses, so you’ll have to weigh the degree of risk with which you’re comfortable when choosing a portfolio.
For more experienced investors, static portfolios offer the chance to retain control over a 529 plan. Any investment must be specifically chosen by the account owner, and investments don’t automatically change over time the way they do with an age-based plan. Instead, the owner chooses how to allocate funds within the account, picking from one of the seven options offered through Utah’s 529 plan.
Here, the Sootchy team details the performance trends for Utah’s various static investment options; these numbers are a five-year average based on an account with an initial $10,000 deposit.
Equity – 100% Domestic: 11.53%
Equity – 10% International: 9.64%
Equity – 30% International: 9.03%
70% Equity / 30% Fixed Income: 8.35%
20% Equity / 80% Fixed Income: 4.18%
Fixed Income: 3.56%
Utah’s 529 plans are somewhat unique in that they offer account owners the chance to create customized portfolios for themselves. Each portfolio comprises a mix of up to 30 different funds administered by either The Vanguard Group or Dimensional Fund Advisors. Because each portfolio can be unique, it’s impossible to generalize about the performance of a particular account, but there are some funds that have shown notable positive trends in both the short and long term.
The following are some of the standout performance trends among the funds available through Utah’s customized investment option; each rate of return is based on a five-year average and a starting balance of $10,000.
VG Growth Index Fund: 16.22%
VG International Growth Fund: 16.17%
VG Small-Cap Growth Index Fund: 12.66%
DFA Global Equity Portfolio: 7.30%
DFA Global Allocation 60/40 Portfolio: 6.00%
Utah’s customized investment options are available in both static and age-based forms. With the age-based option, funds are automatically reallocated when the beneficiary reaches one of ten age groups; new allocations conform to another customized portfolio.
If you’ve already signed up for a 529 plan in Utah or would like to sign up but worry about locking yourself into a fickle portfolio, know that you do have the option to change your investments. Generally, reallocations are limited to two per year, though you may be able to get around that restriction by changing beneficiaries at the same time.
In addition to the movement of funds within an account, owners have the option to change how future contributions are invested at any time without using up one of their two annual changes. If you see that another portfolio is doing better than your own, you can always shift investments and take advantage of that new performance trend instead.
Although the details of investing in a 529 plan can quickly become complicated, the process is made much easier with help from the experts at Sootchy. Our team can provide assistance with opening a new 529 plan in Utah (or anywhere else), managing an existing plan, or contributing to someone else’s account. Simply download the Sootchy app or visit us online and get started today.