UESP Rolls Out Changes to Age-Based Investment Options – Effective July 14, 2017

UESP is making several changes to its age-based and customized investment options. The changes will become effective on July 14, 2017. Here’s a brief summary of what’s new.

Increased number of age bands

UESP will expand the number of age brackets in all its age-based investment options, including the Customized Age-Based option, from seven to 10. More age brackets produce a smoother glide path from equities to fixed-income funds as the account beneficiary ages.

With smaller equity step-downs between age brackets, accounts should be less vulnerable to any sharp market fluctuations on the day when transitioning to the next age bracket. And with more equities in later brackets, your client’s account has more potential to grow as his or her beneficiary ages.

Eliminated College Enrolled trigger

UESP will also remove the College Enrolled trigger from the Age 19+ or College Enrolled age bracket. That means your client’s account funds will no longer automatically reallocate to the Age 19+ bracket if a withdrawal is made to pay for the qualified higher education expenses of a middle school- or high school-age beneficiary who enrolls in a college course.

Instead, the account will remain in the bracket appropriate to the beneficiary’s age and will continue to move down the glide path designed for your client’s investment option.

Additional funds added                                                                                                                   

Vanguard High-Yield Corporate Fund (VWEAX), Vanguard FTSE Social Index Fund (VFTSX), and Dimensional U.S. Sustainability Core 1 Portfolio (DFSIX) will be added as optional underlying funds for the Customized Age-Based and Customized Static investment options. VWEAX will increase the diversity of fixed-income investments. The addition of VFTSX and DFSIX will give your client the opportunity to invest in companies that adhere to social, moral, religious, or environmental principles.

Changes to predetermined options

  • The predetermined Age-Based Aggressive Global and Aggressive Domestic investment options will have a mix of 10 percent equities and 90 percent fixed income allocations in the redesigned Age 19+ age bracket. The current Age 19+ or College Enrolled bracket does not contain equities. The redesigned 19+ bracket for the predetermined Age-Based Moderate and Age-Based Conservative investment options will continue to have no equities.
  • Vanguard Total International Bond Index Fund (VTIFX) will be added to the predetermined Age-Based Aggressive Global, Age-Based Moderate, and Age-Based Conservative investment options as an underlying investment. VTIFX will increase diversity and reduce potential investment risk. An international fixed-income investment currently is not available as an underlying investment in predetermined age-based options.
  • Vanguard Short-Term Bond Index Fund (VBIPX) will be eliminated from all predetermined age-based investment options. Money in VBIPX will be reallocated to the other underlying investment funds in each investment option.

Click here for more details about the changes to the age-based options.