CalABLE offers four investment choices for growing your money. You can choose to put some money into all four options or select 1, 2, or 3 of the options. You can change your choices two times within a calendar year. We all make these decisions differently depending upon our spending and savings goals and comfort with investments, which always include risk, so it is important to understand each of the four options below.
The first option is the FDIC insured account. It earns a small amount of interest and you are not at risk of losing money saved in your CalABLE account. Keep in mind, there are management fees for the CalABLE FDIC insured account. However, the interest earned will help to cover some of the fees.
The next option is called the Conservative Portfolio. This account may earn more interest than the FDIC insured account because your money would be invested in 20% stocks, 55% bonds and 25% in an insurance product that is guaranteed, at a fixed rate of return. Stocks are generally considered more risky than bonds and therefore, the stocks have both the potential to grow more than the FDIC insured account, but it also has the potential to grow tax free and help you get to your savings goals sooner. Only 20% of your money in this option would be invested in stocks. There is a fee for this account too, the fees are charged as a percentage of interest on the amount of your savings.
The Moderate Portfolio would put more of your money into purchasing stocks. Your CalABLE funds would be divided up into 50% stocks, 45% bonds and 5% in a guaranteed insurance product. There is a fee for this account too, the fees are charged as a percentage of interest on the amount of your savings.
The Aggressive Growth Portfolio would put more of your money into buying stocks and it has the greatest potential for increasing your savings over time, but it also carries the greatest risk for losing some of your CalABLE savings. Your money would be invested in 80% stocks and 20% bonds. There is a fee for this account too, the fees are charged as a percentage of interest on the amount of your savings.
Examples of ways you can make your money work for you:
- Monitor your CalABLE account over six months then see if you have any extra money saved. If you do, consider investing some of your savings for the next six months to see how your investment choice performs in comparison to funds saved in your FDIC CalABLE account.
- You may decide to save a specific amount in the FDIC insured account so you have secure savings in case of an emergency. Then any remaining amount you could consider saving in one or more of the other investment plans.