Changes to Investment Options
As a general matter, federal tax law permits a 529 college savings plan account owner to select the types of investments in which plan contributions will be made only when the account is initially opened. This selection will be among the various investment options made available by a state in its 529 college savings plan. Each state may provide a range of investment options that may vary greatly from state to state.
The Internal Revenue Service stated in Notice 2001-55 that it permits an account owner to change the types of investments previously selected no more frequently than once a year and at any time upon a rollover to a new designated beneficiary.
An investor is not limited to investing in the 529 college savings plan in the investor's state of residence or the state in which the designated beneficiary will attend college. However, certain state tax and other benefits may only be available for in-state investments.
Investments in 529 college savings plans may involve investment risk. Although plans are established and maintained by states, the states do not provide guarantees against investment loss, except in certain very limited cases. As with any investment in a mutual fund or other equity security, an investment in a 529 college savings plan may decrease in value. Furthermore, although the past performance of available investment options in a 529 college savings plan may be one of several appropriate factors to consider in choosing an investment, such past performance is not necessarily indicative of how a particular investment will perform in the future.