22 June 2009

Get Smart With College Savings Plans

If you are saving for college in a 529 plan, you probably took a bigger hit than you expected during the 2008 market crash.

What should you do now? Keep the plan or dump it? … Smart idea No. 1: Buy through the state. When you open a 529, you have a wide variety of investment choices. The most popular are the age-based plans. They buy stocks while a child is young and promise to grow more conservative in the years just before college entry. Good age-based funds keep their promise. You have plenty of cash on hand when the tuition comes due. … Smart idea No. 2: You should do the same. Buy your state’s direct-sold funds and choose a plan that is mostly in bonds and cash when the child reaches 17.

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