Retirement investing is an integral part of American personal finance. With $8.9 trillion parked in over 800 thousand retirement plans such as 401K, millions of Americans will increasingly rely on their 401K accounts to fund their future retirement needs. This article is part of a series of case studies we are conducting for various 401K plans. In this article, we will discuss how participants in The Franklin Templeton NJBEST New Jersey 529 College Savings Plan can achieve reasonable investment results using asset allocation strategies. We will also discuss how those portfolios are positioned in today’s market environment.

The NJBEST 529 College Savings Plan, provided by Franklin Templeton Investments, is a dirested plan. This plan of NJ provides two types of investment solution: Age-based Allocation and Individual Portfolios. With the individual portfolio option, the assets in your 529 Plan account will be reallocated only at your instruction, but changes to existing investments within the plan can be made only once per calendar year. MyPlanIQ.com provides asset allocation strategies for the individual-portfolios investors to constructs customized 529 portfolios, which is better tailored to their risk profile. The model portfolios are constructed basing on the plan single-fund portfolios below.

Franklin Templeton Corefolio® 529 Portfolio
Franklin Growth 529 Portfolio
Franklin Growth & Income 529 Portfolio
Franklin Income 529 Portfolio
S&P 500 Index 529 Portfolio
Stable Value 529 Portfolio 

For further information, please visit the official website or the plan PDF file.

The Franklin Templeton NJBEST New Jersey 529 College Savings Plan's 401K plan consists of 6 funds. These funds enable participants to gain exposure to 1 major assets: US Equity . The list of minor asset classes covered:

Conservative Allocation: AOK
Large Blend: IVV , IYY , IWV , VTI , VV , SPY , DLN , RSP , SCHX
Large Growth: IVW , IWZ , JKE , VUG , ELG , QQQQ , RPG , SCHG
Moderate Allocation: AOM

As of Dec 3, 2010, this plan investment choice is rated as below average based on MyPlanIQ Plan Rating methodology that was designed to measure how effective a plan's available investment funds are . It has the following detailed ratings:

Diversification -- Rated as poor (4%)
Fund Quality -- Rated as above average (65%)
Portfolio Building -- Rated as poor (3%)
Overall Rating: below average (22%)

The chart and table below show the historical performance of moderate model portfolios employing strategic and tactical asset allocation strategies ( SAA and TAA , both provided by MyPlanIQ). For comparison purpose, we also include the moderate model portfolios of a typical 3 asset SIB (Simpler Is Better) plan . This SIB plan has the following candidate index funds and their ETFs equivalent:

US Equity :( SPY or VTI )
Foreign Equity :( EFA or VEU )
Fixed Income :( AGG or BND )

Performance chart (as of Dec 3, 2010)

Performance table (as of Dec 3, 2010)

Currently, asset classes in are doing relatively well. These asset classes are available to The Franklin Templeton NJBEST New Jersey 529 College Savings Plan participants.

To summarize, The Franklin Templeton NJBEST New Jersey 529 College Savings Plan plan participants can achieve reasonable investment returns by adopting asset allocation strategies that are tailored to their risk profiles. Currently, the tactical asset allocation strategy indicates overweighing on funds.


Disclosure:

Symbols: , SPY , VTI , AOM , AOK , IVV , IYY , IWV , VV , DLN , RSP , SCHX , IVW , IWZ , JKE , VUG , ELG , QQQQ , RPG , SCHG , EFA , VEU , AGG , BND