Five simple steps to enrolling in a 529 plan

http://www.savingforcollege.com/articles/five-simple-steps-to-enrolling-in-a-529-plan-758

You’ve decided to start saving for college, but now what? According to Savingforcollege.com’s 2nd Annual College Savings Survey, 86 percent of respondents who intend to open a 529 plan in the near future aren’t sure how to get started. Here’s a quick checklist to help guide families through the process:

Step 1: Choose your plan

• Use the World's Simplest Calculator to determine the amount you need to save and narrow down your 529 plan choices.
• Decide if you want to purchase your plan through a financial advisor or directly from the plan’s website. An advisor-sold plan will cost more, but if you’re new to investing you may prefer to work with a professional.
• Find out if your state offers a tax break for residents who use their home state’s plan. Be sure to compare your options with out-of-state plans in case you find better investment performance or lower fees elsewhere.

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Step 2: Name the owner and beneficiary

• You will name yourself as the owner, but if you are using funds from an existing UGMA/UTMA account you will need to preserve the minor’s ownership by designating it as a “custodial 529 account”.
• Grandparents or other relatives should be aware that parent- or student-owned 529 plans will have a more favorable effect on financial aid eligibility.
• You can name yourself or almost anyone else as the beneficiary. You will have the option of changing the beneficiary to another qualifying family member if the original beneficiary doesn’t go to college or has leftover funds in the account.

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Step 3: Select your investment options

• If you choose a static investment option, your investments will remain the same over the life of the account, unless you make changes. Portfolio options typically include choices such as: Aggressive Growth, Moderately Aggressive, Moderately Conservative and Conservative.
• Most families prefer age-based portfolios, which are programmed to automatically change over time, shifting investments based on the age of the beneficiary. Accounts for younger children will invest more aggressively and move toward more conservative options as they get closer to college.
• Within these portfolios, you can also find Socially Responsible investing choices or FDIC-Insured options.

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Step 4: Make a deposit

• After you make your initial contribution, you can link your 529 account to your bank account to set up automatic recurring deposits.
• A great way to fund your account is by asking friends and family for contributions in lieu of birthday and holiday gifts.
• Check with your employer to see if they offer payroll deduction as a convenient way to fund your account.

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Step 5: Review your account regularly

• Watch for changes in program management and administration fees. These have been going down in recent years, but you’ll want to make sure you are paying a fair price.
• Compare your plan’s investment performance with other 529 plans or even your retirement account.
• Use the College Savings Planner to track your progress toward reaching your goal.

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