Unleashing the Power of Your Fidelity 529: A Step-by-Step Guide to Changing Investments
Saving for college is a marathon, not a sprint, and just like any long race, you might need to adjust your pace and strategy along the way. Your Fidelity 529 plan is an incredible tool for education savings, offering tax advantages and a variety of investment options. But what happens when your financial goals shift, market conditions change, or your child grows older? That's where knowing how to change your investments comes in!
Are you ready to take control of your college savings strategy? Great! Let's dive into the specifics of how you can actively manage your Fidelity 529 investments.
Step 1: Understand the "Why" – Why Are You Considering a Change?
Before you click any buttons, it's crucial to understand why you're considering a change in your 529 investment strategy. This isn't just about picking a different fund; it's about aligning your investments with your evolving circumstances.
Sub-heading: Common Reasons for Investment Changes:
Your Beneficiary's Age: As your child gets closer to college, you might want to shift from more aggressive, growth-oriented investments to more conservative options to protect your principal. This is the core principle behind age-based portfolios.
Market Conditions: While it's generally not advisable to make rash decisions based on short-term market fluctuations, sustained periods of volatility or a significant shift in your outlook might warrant a re-evaluation of your risk tolerance.
Changes in Risk Tolerance: Perhaps your personal financial situation has changed, or you simply feel more or less comfortable with risk than when you initially set up the plan.
Performance Review: You might be reviewing your portfolio's performance and considering whether a different allocation or specific portfolio might better suit your long-term goals. Remember, past performance is not indicative of future results.
New Investment Options: Fidelity periodically introduces new investment portfolios within its 529 plans. You might find a new option that better aligns with your strategy.
Important Note: IRS rules permit you to change how your existing investments are allocated only twice per calendar year per beneficiary. However, you can change the investment instructions for future contributions at any time and as often as you like. This distinction is crucial!
Step 2: Log In and Navigate to Your 529 Account
This is your starting point for any changes.
Access Fidelity.com: Open your web browser and go to
Fidelity.com Log In: Enter your username and password to log into your account. If you have multiple accounts, ensure you're logging into the primary account associated with your 529 plan.
Navigate to Portfolio: Once logged in, look for the "Accounts & Trade" tab. Hover over it or click it, and then select "Portfolio" from the dropdown menu.
Select Your 529 Account: On the left-hand side of your Portfolio page, you should see a list of your accounts. Click on your 529 plan account to view its summary.
Step 3: Explore Your Investment Options and Current Allocation
Once you're on your 529 account summary page, it's time to assess your current holdings and review the available choices.
Sub-heading: Reviewing Your Current Investments:
Find "Summary" Tab: On your 529 account page, you'll typically see a "Summary" tab. Click on this if you're not already there.
Locate Investment Selections: Look for a section or tile labeled something like "My 529 investments" or "I want to..." and then select "View My Investment Selections" or "Review/Manage my investments." This will give you a detailed breakdown of your current investment allocation.
Pay attention to the percentages allocated to different asset classes (stocks, bonds, cash) and the specific portfolios you are invested in.
Sub-heading: Understanding Fidelity 529 Investment Choices:
Fidelity generally offers a few main types of portfolios within its 529 plans:
Age-Based Portfolios: These are professionally managed portfolios that automatically adjust their asset allocation as your beneficiary gets closer to college age. They typically start with a higher percentage of equities (stocks) for younger beneficiaries and gradually shift to more conservative investments like bonds and cash as the beneficiary approaches enrollment. This is often a "set it and forget it" option for many investors.
Pros: Automatic rebalancing, professionally managed, simplifies investing.
Cons: Less control over specific underlying funds, may not perfectly align with every individual's risk tolerance.
Static Portfolios: These portfolios maintain a consistent asset allocation over time, regardless of the beneficiary's age. You choose a portfolio that aligns with a specific risk tolerance (e.g., Aggressive Growth, Moderate Growth, Conservative).
Pros: Consistent strategy, you define the risk level.
Cons: Requires manual rebalancing if your desired allocation drifts significantly due to market performance.
Individual Fund Portfolios: Some plans may offer the ability to select individual fund portfolios that mirror specific underlying mutual funds or ETFs. This gives you the most control but also requires more active management.
Pros: Maximum control, ability to target specific market segments.
Cons: Requires more investment knowledge and active management, you cannot choose individual stocks or ETFs, only the specified portfolios.
Take your time to explore the details of each available portfolio, including their underlying holdings, historical performance, and expense ratios. This information is usually accessible directly from the "Investment Options" or "Plan Performance" pages on Fidelity's website for your specific state's 529 plan.
Step 4: Initiate the Investment Change
Now that you've done your research, you're ready to make the change. Remember the distinction between current investments and future contributions.
Sub-heading: Changing Future Contributions:
This is the easiest and most flexible change you can make.
Locate "Change Elections" or "Manage Investments": On your 529 account summary or "Manage Investments" page, look for a link or button that says something like "Change elections" or "Change how your future contributions are invested."
Select New Allocation: Follow the on-screen prompts to select your desired investment portfolio(s) for all new money you contribute to the 529 plan. You can typically choose one or a combination of the available portfolios.
Confirm Changes: Review your selections carefully and confirm the changes. These changes will take effect with your very next contribution.
Sub-heading: Changing Current Investments (Portfolio Exchange):
This is where the twice-per-year rule comes into play.
Find "Change Your Investments" or "Initiate a Portfolio Exchange": On your 529 account summary or "Manage Investments" page, look for a link or button titled "Change your investments" or "Initiate a portfolio exchange."
Select Your Exchange Options:
You will typically be prompted to sell your existing holdings from one or more portfolios and buy into new portfolios.
Important: Online exchanges usually apply to your entire account balance. If you wish to exchange only a part of your account, you might need to call a Fidelity representative.
Review and Submit: Carefully review the details of your exchange, including the portfolios you are moving money from and to. Confirm your choices and submit the exchange request.
Orders for current investment changes are generally processed at the next unit value calculation (usually at the close of the NYSE, 4:00 p.m. ET).
You'll receive a confirmation, either via email (if you have eDelivery) or by mail, within a few business days.
Step 5: Monitor and Rebalance (If Applicable)
Changing your investments isn't a one-and-done deal. It's an ongoing process to ensure your plan stays on track.
Sub-heading: For Age-Based Portfolios:
Automatic Adjustment: If you've chosen an age-based portfolio, the good news is that Fidelity will automatically rebalance your portfolio over time, gradually shifting to more conservative investments as your beneficiary ages. You generally don't need to do anything else.
Periodic Review: While automatic, it's still a good idea to periodically review your age-based portfolio to ensure its underlying asset allocation still aligns with your comfort level and the beneficiary's proximity to college.
Sub-heading: For Static or Individual Fund Portfolios:
Manual Rebalancing: If you've chosen static or individual fund portfolios, you will need to manually rebalance your portfolio from time to time. Rebalancing involves selling investments that have grown disproportionately and buying more of those that have shrunk, to bring your portfolio back to your target asset allocation.
Set a Schedule: Consider a calendar-based approach (e.g., once a year) or a threshold-based approach (e.g., rebalance if an asset class deviates by 5% or more from your target).
Utilize New Contributions: A smart way to rebalance without triggering a "sell" order (and using up one of your two annual exchange opportunities) is to direct new contributions to the underperforming asset classes or portfolios.
Step 6: Keep Records and Stay Informed
After making changes, it's essential to keep good records and stay up-to-date.
Confirmation Statements: Save copies of your confirmation statements for any investment changes.
Regularly Review Statements: Review your Fidelity 529 statements regularly to track your investment performance and ensure everything is as expected.
Fidelity Resources: Utilize Fidelity's extensive online resources, FAQs, and customer service for any questions or assistance. They have dedicated 529 plan specialists who can help.
10 Related FAQ Questions (How to...)
Here are some common "How to" questions related to changing investments in a Fidelity 529, with quick answers:
How to find my current Fidelity 529 investment allocation?
Log in to Fidelity.com, go to "Accounts & Trade" > "Portfolio," select your 529 account, and then look for "My 529 investments" or "View My Investment Selections" on the "Summary" tab.
How to change where my future Fidelity 529 contributions go?
On your 529 account's "Manage Investments" page, find the "Change elections" or "Change how your future contributions are invested" link and follow the prompts. You can do this anytime.
How to change where my current Fidelity 529 investments are allocated?
On your 529 account's "Manage Investments" page, look for "Change your investments" or "Initiate a portfolio exchange." Remember, you are limited to two such changes per beneficiary per calendar year.
How to know if I should choose an Age-Based or Static portfolio for my Fidelity 529?
Age-Based portfolios automatically adjust risk as the beneficiary ages, suitable for "set it and forget it" investors. Static portfolios maintain a consistent risk level, requiring manual rebalancing, and are better for those who want more control over their asset mix.
How to rebalance my Fidelity 529 plan if I'm in a static portfolio?
You'll need to manually initiate a portfolio exchange (limited to twice a year) to sell holdings that have grown and buy into those that have shrunk, bringing your allocation back to your target. Alternatively, direct new contributions to underperforming assets.
How to find the performance of Fidelity 529 investment options?
Navigate to your specific state's Fidelity-managed 529 plan page on Fidelity.com and look for a "Plan Performance" or "Investment Options" section.
How to contact Fidelity's 529 team for assistance?
You can typically find their contact information (phone number and hours) on the Fidelity 529 plan pages or under "Customer Service" on Fidelity.com. Say "529 plan" when prompted by their automated system.
How to change the beneficiary of my Fidelity 529 plan?
While not an investment change, changing the beneficiary does allow for an additional investment change opportunity. You'll need to complete a beneficiary change form, typically found in Fidelity's "Forms & Applications" section. The new beneficiary must be an eligible family member to avoid tax implications.
How to avoid taxes when changing investments in my Fidelity 529?
Changes made within the parameters of the IRS rules (twice per year per beneficiary, or upon a beneficiary change) are tax-free. Non-qualified withdrawals or changes outside these rules can incur taxes and penalties.
How to view the underlying funds within a Fidelity 529 portfolio?
On the "Investment Options" or "Plan Performance" page for your specific Fidelity 529 plan, you can usually click on a portfolio's name to view its detailed holdings, including the mutual funds or ETFs it invests in.