Investment Control
If you are investment-savvy, then handing over control of your 529 account investments may be a difficult thing for you to do. If you're not quite so on top of things in the investment world, however, you may find trusting your money to a professional investment manager a little comforting. Remember that a money management company is actually managing the investments. The state works with those companies to set up your selection of investment options. The good news is that some very well-known money management companies are managing many state programs. Your comfort level may increase just knowing the reputation of those handling your account.

The choices you have for investing your 529 account funds are determined by the investment manager of the plan. Many states are expanding their investment choices, making it easier for most people to find a plan that suits both their goals and their acceptable risk levels.

In addition to mutual funds, most state plans are also beginning to offer several age-based portfolios of mutual funds that include conservative, moderate, and aggressive asset allocations. These types of investment choices start out in stocks when your child is very young and shift gradually to bonds and money-market funds as your child gets closer to college-age. The idea behind the age-based portfolios is to be aggressive when you have more time, but to keep your investment safer as it gets closer to the time that you need to cash out. The perk behind this scheme is that you don't have to remember to shift the investments yourself. You can buy it and then forget about it. In addition to the age-based portfolios, you may have the option of 100-percent stock and fixed-income funds that can be used alongside an age-based portfolio in order to fine-tune the overall allocations to suit your needs.

If you decide later on that you're not happy with the way your account is growing, you have the option of rolling the money over into another state's 529 plan with no penalty. Keep in mind that if you're getting a state tax break by using your own state's plan then you'll lose that by moving to another state's plan. You can always keep the account in your state and open second account in another state. There is no limit to the number of accounts you can have -- even for the same child!

Each state has different investment options and this is a very important part of setting up your plan. It pays to investigate several state's plans in order to find the best deal not only for investment options but for the other requirements and limitations of the plan. Let's go over the how to pick the right plan...