One of the most common questions college savers ask when selecting a 529 plan is, “How well does it perform?” While performance is only one of the many factors investors should consider in selecting a 529 savings plan, it’s natural that families want to maximize their savings in the amount of time they have available.
Saving For College’s 529 Plan Performance Rankings offer an objective and independent analysis to compare 529 plans based on relative performance. The methodology analyzes the investment returns of thousands of 529 plan portfolios to generate new rankings each quarter.
After several months of research, development, and testing, we completely revamped the 529 Plan Performance Rankings methodology in 2024, and the latest results are now available. Among the changes, the new rankings only consider the investment performance of age-based and year-of-enrollment portfolios. Age-based and year-of-enrollment portfolios dynamically adjust toward more conservative asset allocations as a beneficiary approaches college age.
With the popularity of age-based portfolios and the convenience they offer investors, all 529 plans now offer one or more age-based options, and over half of 529 plan assets are invested in these portfolios. Our new focus on age-based portfolios allows us to provide a performance comparison that is more relevant to the average investor.
Because age-based portfolios utilize the various underlying funds and investments offered by a 529 plan, this methodology can also provide valuable insights to investors who want to utilize the static investment options offered by a 529 plan.
These performance rankings are used as an input to our 529 Plan Ratings. These ratings assign an overall score to each 529 plan, and take into consideration additional factors including a plan’s ease of use, what each plan offers to make savers more successful, and the likelihood a 529 plan will continue to deliver excellence.
There are several things to keep in mind when using these performance rankings:
Different portfolios offer different returns
529 savings plans offer a variety of investment options. Your actual rate of return will vary depending on which portfolio option you choose and for how long you are invested. If you decide to go with an age-based option, the plan may offer more than one. For example, some 529 plans offer different age-based options for conservative, moderate and aggressive investment styles; others offer actively managed options vs. passively managed (index funds) styles; and others may have options to suit particular investment objectives, such as an ESG track.
529 plans that perform well in our rankings may have more aggressive asset allocations
Portfolios that include more equity may offer higher returns but higher risk. They tend to perform better when the stock market is doing well, but when there is a downturn, these portfolios may perform worse than portfolios that include more conservative assets. Before you select a 529 plan, be sure you understand the investment options available to you and that the asset allocations (e.g., the amount of equity vs. fixed-income investments) are suitable for your risk tolerance.
Our rankings generate a hypothetical average return
Our methodology processes data on the actual performance of all age-based portfolios by age and then calculates an average return over the ages of 0 to 19+. While this average is based on actual returns, it is hypothetical because at any point in time an investor will be at only one point of the glide path, and their returns will vary depending on actual market conditions. The hypothetical average return is for comparison purposes only.
Plan performance is ranked over different investment periods
Each quarter, we rank 529 plans for one-year, three-year, five-year and ten-year investment performance. The longer investment time periods provide a better indication of sustained performance. However, keep in mind that many plans have portfolios that were introduced less than five or ten years ago and, therefore, may not have sufficient data available to be ranked for those longer investment periods. And remember that historical performance should be used with caution since it does not predict future results.
Read more about our methodology in our white paper.
