Don’t waste an investment option change
When a family saves for college with a 529 plan, their needs and the market’s performance may change periodically. That is why the IRS allows investment option changes for 529 users.
An investment option change may be made twice per calendar year for the same beneficiary, and only the account owner/agent or a person with the appropriate Limited Power of Attorney authority can request an investment option change.
A word of caution: You should take steps to avoid inadvertently using up the yearly allotted option changes.
- Advisors often open my529 accounts for their clients without selecting an investment option. If no investment option is chosen upon opening an account, the account is automatically invested in my529’s FDIC-Insured investment option. Later, the advisor may select an option before there is money in the account, mistakenly thinking it will not count as an investment option change. But it does. This is why it is beneficial to take time with your clients to discuss investment options and select one at the time the account is opened.
- To change investment options on more than one account for the same beneficiary, and have those changes treated as one of the two allowable investment option changes, requests for each my529 account should be submitted at the same time online at my529.org or by submitting an Investment Option Change form (form 405).
- Also, keep in mind that changing the allocation of the underlying funds for an account within a customized investment option is considered an investment option change.
Learn other regulations regarding investment option changes in the my529 Program Description.