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Age-based options: Why are they so great?

Designed specifically for college goals, these options let you manage your investments without having to, you know, "manage" your investments.

A complete portfolio that changes along with your needs

If you're investing for K–12 goals, you should consider individual portfolios. Age-based options are generally designed for college savings and may not be appropriate for K–12 time horizons.

However, if you are investing for higher education, choosing an age-based option is as simple as knowing how well you generally tolerate risk.

For example, if you consider yourself middle of the road as far as risk—you don't freak out at small market moves, but you also don't think you can stomach large swings in your account balance—you might choose a moderate age-based option.

As your child gets older, your investment provider will move you through a series of portfolios included in this option so that your investments get more conservative as you get closer to college. That way, the risk of a temporary loss in your account goes down before you need to start taking money out.

"Conservative" and "aggressive" options work the same way, but they start and end with a risk profile that's more, well, conservative or aggressive. You get the picture.

You can see an example of how age-based options work below.

No matter which track you choose, you won't need to worry about:

  • Figuring out what specific asset mix you should have.
  • Making sure market movements don't take you away from that asset mix.
  • Changing to a more conservative mix as time goes by.

All those things will be handled for you by your investment provider.

Sound good? Choose a 529 plan

If you're investing for college and age-based options sound like the perfect choice for you, consider a 529 plan. It's the only account type that offers age-based options for college savings.

How age-based options work

Conservative age-based option


Child age 0 to 5 years (more aggressive)

Asset allocation: 50% Stocks, 50% Bonds, 0% Short-term reserves

Child age 6 to 10 years

Asset allocation: 25% Stocks, 75% Bonds, 0% Short-term reserves

Child age 11 to 15 years

Asset allocation: 0% Stocks, 75% Bonds, 25% Short-term reserves

Child age 16 to 18 years

Asset allocation: 0% Stocks, 75% Bonds, 25% Short-term reserves

Child age 19 years or more (more conservative)

Asset allocation: 0% Stocks, 0% Bonds, 100% Short-term reserves

Moderate age-based option


Child age 0 to 5 years (more aggressive)

Asset allocation: 75% Stocks, 25% Bonds, 0% Short-term reserves

Child age 6 to 10 years

Asset allocation: 50% Stocks, 50% Bonds, 0% Short-term reserves

Child age 11 to 15 years

Asset allocation: 25% Stocks, 75% Bonds, 0% Short-term reserves

Child age 16 to 18 years

Asset allocation: 0% Stocks, 75% Bonds, 25% Short-term reserves

Child age 19 years or more (more conservative)

Asset allocation: 0% Stocks, 75% Bonds, 25% Short-term reserves

Aggressive age-based option


Child age 0 to 5 years (more aggressive)

Asset allocation: 100% Stocks, 0% Bonds, 0% Short-term reserves

Child age 6 to 10 years

Asset allocation: 75% Stocks, 25% Bonds, 0% Short-term reserves

Child age 11 to 15 years

Asset allocation: 50% Stocks, 50% Bonds, 0% Short-term reserves

Child age 16 to 18 years

Asset allocation: 25% Stocks, 75% Bonds, 0% Short-term reserves

Child age 19 years or more (more conservative)

Asset allocation: 0% Stocks, 75% Bonds, 25% Short-term reserves
Open a college account

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REFERENCE CONTENT

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Risk

Usually refers to investment risk, which is a measure of how likely it is that you could lose money in an investment. However, there are other types of risk when it comes to investing.

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Moderate

A moderate investment is neither very aggressive nor very conservative. Because risk and reward are related, a moderate investor can expect returns that are, on average, neither very high nor very low.

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Conservative

A conservative portfolio is relatively safe from investment risk (although there's no guarantee it won't lose money). Because risk and reward are related, a conservative investor can also expect returns that are, on average and over time, lower than those of someone with a moderate or aggressive portfolio.

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Aggressive

An aggressive portfolio is subject to a relatively high level of investment risk. Because risk and reward are related, an aggressive investor can also expect returns that are, on average and over time, higher than those of someone with a moderate or conservative portfolio.

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Asset mix

The way your account is divided among different asset classes, including stock, bond, and short-term or "cash" investments.

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How age-based options work

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How age-based options work

529 age-based options

You know a 529 plan is great for saving for college. But what investments will help you strike the right balance between growing your college savings and trying to protect it from market losses?

If you're curious about how 529 age-based portfolios work, this video is for you.

With age-based investment options, you start by picking an option based on how risky you'd like to be with your money: conservative, aggressive, or somewhere in between. Then the account gradually moves from more stocks to more bonds as your child gets closer and closer to college.

Once you've decided on whether you're aggressive, conservative, or somewhere in between, your 529 plan will invest your money based on your child's current age.

So how do these portfolios work once you've opened your account? Let's take a look using the moderate age-based option. You have a child who's three. So your 529 investment starts here—having more stocks than bonds. Then when your child turns six, you move to a portfolio with a little more in bonds. Your allocation gets even more conservative at 11 and again at 16. By the time your child's in college, your portfolio is all cash and bonds, decreasing the risk of losing your college money.

What's the benefit to all this moving around? Well, when your child is young, you have more time to make up any potential market losses caused by riskier stock investments. Your main focus is earning returns on your investments, so you have enough money to cover those college costs. But as your child gets closer to college, you shift into preservation mode. Your main goal is to reduce the possibility of a loss in your account. And the rebalancing happens automatically, giving you one less thing to worry about. It's that simple.

So there you have it! Age-based investment options: complete portfolio in one investment, as conservative or aggressive as you want it to be, automatically moves to more conservative investments as your child gets older.

Consider choosing one to help you reach your college savings goals.


For more information about any 529 college savings plan, contact the plan provider to obtain a Program Description, which includes investment objectives, risks, charges, expenses, and other information; read and consider it carefully before investing. If you are not a taxpayer of the state offering the plan, consider before investing whether your or the designated beneficiary's home state offers any state tax or other benefits that are only available for investments in such state's qualified tuition program. Vanguard Marketing Corporation serves as distributor and underwriter for some 529 plans.

All investments are subject to risk, including the possible loss of money you invest.