There are two instances in which you might come across the term “guaranteed” in relation to 529 plans, and it’s important to distinguish between them.

The first refers to the promise a state makes to cover the full cost of tuition, provided you make adequate contributions to your plan. In essence, it’s a guarantee that whatever you pay toward tuition today will grow at a fast enough rate to cover the cost of tuition in the future; should a plan with one of these guarantees fall short, the state will then make up the difference. This type of guarantee applies predominantly to certain prepaid tuition plans, though Pennsylvania has a savings plan that comes with a similar promise.

The second instance in which you might see the term “guaranteed” is with regards to a particular investment portfolio. When making most types of investments, there is an inherent level of risk that you could lose a portion of your funds if the market takes a turn for the worse. When you invest in a guaranteed portfolio, however, the idea is that your investment is protected from loss. The trade-off with a guaranteed investment is that the lower risk comes with a lower rate of return, so you’re unlikely to see much in the way of earnings with one of these portfolios.