When the stock market rises, the aggressive plan goes up more than the others. But for the last year, anyone using it is facing a double-digit loss. How much depends on the age of the person for whom the investments are made. Remember, the portfolio for a 1-year-old has more stock than one for a 19-year-old in this plan.
These are one-year returns through August, the most recent available:
Less aggressive plans did better because they contained less stock. But they weren’t great either. It has been that kind of year.
Here are selected one-year returns for the “moderate growth” age-based plan in New York:
And these are the “conservative growth” returns:
Note that the only positive number here is the conservative option for people 18 to 19 years old — those who may already need the money. That return is better because the portfolio is held in a money-market fund, which is a good place for short-term money but won’t keep up with inflation.
On the other hand
Over the long haul, taking on greater risk has been worth it.
At my request, New York State calculated the annualized returns of these 529 plans from Aug. 1, 2003, through Aug. 1, 2022 — representing a 15-year investment of a lump-sum contribution. The returns were excellent:
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6.9 percent, annualized, for the aggressive option.
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5.9 percent for the moderate option.
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4.7 percent for the conservative one.
In other words, even with recent losses, you are ahead if you used any of these plans over those 15 years. Knowing that may help you cope with the immediate pain.
The California ScholarShare plan has provided similar ballpark returns, and its short-term performance numbers are clearly visible. That’s not the case for the New York plan: You need to hunt for those numbers, if you are trying to figure out which may be best for you.
“This is supposed to be a simple and easy-to-use plan for people who are novice investors,” Patricia Oey, a senior analyst at Morningstar, said of the New York plan. “But when the website is complicated, and when it’s difficult to find performance data, it isn’t aligned with those goals.”
