5 ways to tell if you're using the wrong 529 plan

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According to our 3nd annual College Savings Survey, 72 percent of the respondents who intend to open a 529 plan don't know the steps involved. What's more, 50 percent said they don't know which investment option they would choose when they enroll. So what if your family is currently using a 529 plan? There are over 100 different plans available – how can you be sure you made the right decision and are using the best plan to suit your family's needs? Here are five red flags to look out for:

1. You're not happy with your plan's performance

We're talking about investment performance, which determines how much your plan is worth. In other words, poor performance can eat away at your savings.

One way to check your plans performance is to look at Savingforcollege.com's quarterly performance rankings. Of course, past performance does not guarantee future results, but the rankings will give you a good idea of how your plan compares to other 529 plans.

RELATED: When should you switch 529 plans?

2. You're missing out on a state tax deduction or credit

35 states, including the District of Columbia, offer a tax deduction or credit for residents. If you're using an out-of-state plan, check to see if there would be any benefit to switching to your home state's plan. You can rollover your 529 plan balance into a different 529 plan one time in a 12-month period.

RELATED: Should you use your employer-sponsored 529 plan?

3. You chose a static option years ago and have yet to adjust your allocations

When you enroll in a 529 plan you selected your investment options and likely had to choose between static or age-based options.

A static option is not programmed to change over time, which means as your child gets closer to college it's up to you to shift the underlying investments toward less risky options. If you're not comfortable managing your investments that way you can switch to an age-based option, which will automatically adjust your investments based on the age of the child you are saving for.

Since age-based options do most of the work for you, they are typically the best option for most people. Yet according to our College Savings Survey only 20 percent of families who intend on opening a 529 plan said they would choose this option.

RELATED: Investing trends of 529 college savers

4. You're paying high fees that are eroding your savings

Our College Savings survey showed that families listed "low management fees" as a criteria for selecting their 529 plan. These fees, along with expenses of the underlying investments and sales charges if you're using an advisor-sold plan, can have a big impact on your savings. To see the plans with the lowest fees, check out Savingforcollege.com's 529 Fee Study.

RELATED: 8 common 529 plan mistakes to avoid

5. You're not on track to meet your savings goal

It's important to give your 529 plan regular check-ups to make sure you'll have the money you need when it's time for college. If you find that your plan's investment strategy isn't working in your favor, it might be time for a change. A tool like the College Savings Planner can help you identify your goals based on your child's age and real expected college costs.

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