South Dakota 529 plan - map of the united states

South Dakota 529 plan | Education Savings Account

Ray Fisher
Ray Fisher

Credentials
Licenses - Series 7, 66, 6, 24, 4
Firms- E*Trade, JP Morgan, Merrill Lynch, Scottrade

Table of Contents | Pro Stock Options

South Dakota 529 plans

CollegeAccess 529 – Direct Sold

  • South Dakota residents only
  • 9 age based options
  • 1 fixed income static portfolio
  • 2 single fund portfolios choices
  • access via CollegeAccess 529

CollegeAccess 529 – Advisor Sold

  • non South Dakota residents
  • 9 age based options
  • 3 fixed income static portfolio options
  • 5 mutual fund asset types choices
  • 13 mutual funds choices
  • access via your broker | www.etrade.com

CollegeAccess 529 - Direct Sold | South Dakota Residents

Aged Based Portfolios

There are a total of 9 age based portfolios based on the age of the beneficiary.

Aged based portfolios tend to invest in a more aggressive style for portfolios catering to younger beneficiaries. As the beneficiary gets older, the portfolio shifts towards a more conservative allocation model.

As you can see, the aged based 1 model is for participants that range from 0 to 8 years old. The portfolio’s highest percentage is invested in US Large Cap Stocks at 27%.

The 2nd highest percentage, 26%, is invested in multi assets which can include stocks and fixed income type investments such as bonds and preferred stocks.

Aged Based 1 (ages 0-8)

This fund has 21% exposure to International stocks rounding out the 3rd highest percentage.

Next, lets take a look at the Age-Based 9 portfolio which is designated for beneficiaries that are 17 years old and up. The amount of risk in this portfolio is drastically reduced in order to reduce volatility of the portfolio.

Aged Based 9 (ages 17 and over)

Fixed income tops the asset allocation percentage with 86% of the portfolio being invested in fixed income. Multi assets is the 2nd largest percentage at 12%. There is only 1% international exposure, and there is 1% commodity related exposure.

Static Portfolio

South Dakota residents have access to 1 static portfolio that is primarily invested in bonds and other fixed income type securities. This conservative portfolio is designed to not have too much volatility.

Fund of Fund Portfolio - Bonds

Aged Based 1 (ages 0-8)

Individual Investment Portfolios

South Dakota residents have access to 2 individual investment portfolios. A multi asset portfolio and a fixed income portfolio.

Both portfolios are managed by Pimco, a major and well respected mutual fund company that is known for their various fixed income mutual funds.

CollegeAccess 529 - Advisor Sold | non South Dakota Residents

Aged Based Portfolios

For non South Dakota residents, you have access to all 9 aged based portfolios. Lets compare the portfolios for the 2 youngest age groups. Lets start with the aged based 1 portfolio for ages 0-8.

Aged Based 1 (ages 0-8)

Aged based 1 has 27% exposure to U.S. based large cap equities.

26% is invested in multi assets, 21% in international equities, 16% in global equities, 5% in fixed income and 5% in commodity – related securities.

Next, lets take a look at the aged based 2 portfolio for ages 9-10.

Notice the shift in the allocation percentages compared to the aged based 1 portfolio.

Percentage wise, the more aggressive funds have been reduced and the more conservative securities have been increased. This pattern continues for age based portfolios 3 – 9.

Aged Based 2 (ages 9-10)

For example, the U.S. large cap section accounted for 27% of age based portfolio 1 but only 21% of age based portfolio 2.

Multi assets was 26% of age based portfolio 1, but has been increased to 30% of the aged based 2 portfolio.

Static Portfolios

Investors can also select from static fund of fund portfolios that invest in stocks, fixed income, and/or money markets. Fund of funds is a fund that invests in several mutual funds which increases diversity and reduces risk because your invested in many more securities than you would be by having just 1 fund or 1 stock. There are 3 types of static portfolios to choose from:

 

  • Diversified Equity fund
  • Diversified Bond fund
  • Ultra short bond fund

Diversified Equity

The Diversified equity fund is the most aggressive of the the 3 static fund of funds. It is investing in 4 asset types:

 

  • U.S. large cap equities
  • International equities
  • Global equities
  • Commodity – related

The Diversified bond fund is investing in various types of bond funds.

Diversified Bonds

The Ultra short bond portfolio fund is investing in fixed income with shorter maturities than the Diversified bond fund. This is the most conservative of the 3 static fund of funds.

Ultra Short Bond Fund

Individual Investment Portfolios

The 3rd option allows investors to construct their own mutual portfolios.

There are 5 asset classes to choose from. U.S. large cap equities, invests in larger more established U.S. based companies companies.

U.S. small cap equities tends to invest in smaller lesser known U.S. based companies. International Equities invests in Foreign based companies.

Multi Asset can invest in both stock and fixed income type investments, plus target based funds where assets are shifted and rebalanced depending on various time horizons.

Fixed income related funds can invest in securities that pay interest or dividends such as bonds and/or preferred stocks respectively.

Common 529 Questions

529 plans are accounts used for educational purposes.  The earnings grow on a tax deferred basis, and can be withdrawn tax free if used for qualified educational purposes.

Colleges, universities, public or private k-12 schools, religious schools, post secondary institutions such as trade schools.

  • tuition and fees
  • k-12 tuition | up to $10,0000 per calendar year
  • technology expenses such as computers and internet 
  • books and supplies

Final Thoughts

South Dakota’s 529 plans are called CollegeAccess 529 plans.

South Dakota residents have access to 3 different types of plans

  • access to 9 types of age based portfolios
  • access to 1 type of static portfolio
  • access to 2 types of individual portfolios

Residents in the all the other states have also have access to the 3 plan types.

  • access to 9 types of age based portfolios
  • access to 3 types of static portfolios
  • access to 5 types of individual portfolios