7 things every 529 investor should do this year

http://www.savingforcollege.com/articles/7-things-every-529-investor-should-do-this-year

A Section 529 college-savings plan can be the ultimate "set-it-and-forget-it" investment vehicle.

If you choose your 529 plan's age-based investment option, your underlying investments are periodically--and automatically--adjusted to an appropriate allocation based on the age of your child or number of years to expected college matriculation. And until the year you begin taking withdrawals, there are no dividends, interest, or capital gains being thrown off, and no Forms 1099 to deal with.

However, sitting back and ignoring the 529 account you set up for your child or grandchild until he are she reaches college age is not the best approach. You should be a bit more vigilant and hands-on with it. Here are 7 things for you to do this and every future year:

1. Open your mail

States are constantly making changes to their 529 plans and those changes are typically communicated to current investors through correspondence, newsletters, and updated plan disclosure documents. Investment options may be added or eliminated; fees and expenses may change; and occasionally the outside program manager is replaced by another firm, leading to an entirely new set of investments. Rarely are you required to take any action--even if investments are changed your account is automatically "mapped" over to the new investments--but you may want to make a change based on what is happening in your 529 plan. Open the mail you receive from your 529 plan and determine if important changes are occurring that warrant further attention.

2. Consider switching investment options

Your 529 plan's age-based investment option is an appropriate choice for those who do not have a specific reason for selecting one of the plan's "static" investment options. But consider carefully if you are better off with a static option. For example, one of the plan's fixed-income options may be better for the parent who already owns plenty of stocks and stock-heavy mutual funds outside of a 529 plan. The fixed-income investments in the 529 plan may help balance out your overall investment picture and, because of the type of income it earns, takes fuller advantage of the tax benefits of the 529 plan.

If you choose to use one or more static options, you will want to review them periodically to make sure you remain comfortable with your choice. You can switch among the investment options in your 529 plan, but only once in any calendar year. Don't delay your review until January of next year when a change might be called for this year.

3. See where you are at with your college savings

Are you on track to meet your college savings goals? Has the investment return in your 529 plan kept pace with increases in college tuition and other student expenses? It doesn't take long to get a snapshot of where you are at with your college savings. Simply type in your child's age at Savingforcollege.com's World's Simplest College Cost Calculator and adjust the assumptions for your particular situation. Remember to set reasonable expectations--most parents are doing great if they get on track to cover one year at a private college--and instead of trying to reach your goal by the time your child turns 18, plan to continue your contributions through his or her college career.

4. Adjust your automatic contributions

If you previously set up automatic monthly contributions with your 529 plan, or a payroll deduction plan through your employer, determine if your current budget allows you to increase the amount of your periodic contributions. Even a small increase can make a major difference in the amount available to pay for college down the road.

If you are not currently making automatic contributions to your 529 plan, consider doing so now.

5. Let interested relatives know you have a 529

You don't want to be obnoxious in promoting your child's college-savings account to all your friends and relatives, but some of them will be receptive to a suggestion that contributions to a 529 plan be made in lieu of gifts of electronic games on birthdays and holidays. Of course, the best way for this to happen is for the money to go into the 529 plan you have already established, rather than having others set up their own accounts for your child.

To do this, you must let your most-likely contributors know about your 529 plan. With most plans, a check made out to the name of the 529 plan is sufficient and would not require that you communicate your account number or child's social security number. Simply receive the check and mail it to your 529 plan along with your filled-out contribution form.

If you want to be more formal and systematic about the whole process, with pre-written instructions and the ability of your relatives to make direct contributions to your account, check with your plan to see if it offers a "friends and family" service. You can also investigate the commercial gifting services like GradSave.

6. Open a 529 rewards account

Rewards programs can be great as long as they are free to join and do not steer you to purchases that you can buy at lower cost somewhere else. The biggest rewards program geared to college savings and 529 plans is Upromise rewards. Also consider credit card programs that rebate a percentage of your purchases directly to a 529 plan, like the ones offered through Fidelity, Upromise, and 529 plans in Alabama and Illinois. Sage Scholars is also a popular rewards programs where certain investments you make turn into guaranteed scholarship dollars at participating private colleges located throughout the country.

7. Download Savingforcollege.com's Family Guide to College Savings

It's free, so why not? This handy guide from Savingforcollege.com takes you through the various higher-education tax incentives including 529 plans, Coverdell education savings accounts, education savings bonds, the American Opportunity Tax Credit, and the Lifetime Learning credit. The booklet also discusses budgeting for college expenses and other issues including legal considerations. Free downloads are available for a limited time only, so download your copy today.