Setting Up a 529 Plan? Consider These 4 Things


If you’re planning on saving for college, there’s no better account for your investments and savings than a 529 plan account. 529 plans grow without capital gains tax and often offer state tax deductions. Some plans even offer scholarships.

And just like 401Ks, the retirement account equivalent, setting up a 529 plan college savings account is fairly easy. All you’ll need to know is your basic personal information,  how to get your state’s college savings tax benefits, how to choose an account, and how much you want to fund the account with.

We asked Betty Lochner, former Washington State 529 Plans Director and current Cornerstone Coaching and Training CEO, for her best tips for starting and funding a 529 plan.


1. Research State Tax Benefits



You can choose among 529 plans in any of 50 states, no matter which state you actually live in. However, it’s important to check if your state offers tax parity if there are tax benefits such as being able to deduct 529 plan contributions. Tax parity means that it doesn’t matter if you choose your own state’s plan. You’d get the tax deduction no matter which plan you choose.

Go to to find out the answer and begin to research 529 plans. While looking at the site to compare plans, also check to see if your state has a prepaid tuition plan. These plans offer a chance to buy future tuition and fees at today’s rates. Around 10 states offer this option.


2. Consider Investment Options



When comparing 529 plans, look over investment options. If you want a set-it-and-forget approach, you’re part of the majority. Most of us choose an age-based plan, which gets less risky as your students get closer to college age. If you want to choose individual mutual funds or mutual fund packages, you’ll want to check into which funds are offered within the plans you are considering.  You can also choose an advisor-based plan if you want even more control of your investments.

If you have any questions, call customer service for the 529 plans you are considering. The call centers are staffed with licensed investment advisors, says Lochner.


3. Decide Whether the Account Will Be Under Your Name or the Student’s Name



Once, you’ve done basic research, the next step is deciding who the account should name as the beneficiary, the person who will use the account for their education. If you have multiple kids who are more than a year apart, you may want to open an account for yourself and decide later who will use it. You may eventually open several accounts: one for each child and one you can decide who the beneficiary is later.

“ I have three young grand babies,” says Lochner. “I don’t know where they are going to school. So I have an account for each child and one I can distribute as needed.” For instance, she decide to give the extra account to her daughter or son, whomever at the time needs the savings more when their children are ready to go to college.


3. Open A College Savings Plan



Now, that you know what you want in a 529 plan, you can select one on You’ll need basic information such as your social security number and the social security number of the beneficiary. You’ll select investments or an age-based plan during the process. You can change your investment choices up to twice annually, says Lochner.

You’ll make the initial deposit via your bank account number or a credit card. You can also set up monthly contributions from either payment method. The minimum monthly deposit varies between $0 and $100. The minimum initial deposit requirement is often waived if you set up automatic monthly deposits.


4. Get Help From Family And Friends



You aren’t limited to just your own contributions. You can save hundreds per year to your account by letting your friends and family know you are saving for college. Send them a direct link for your new plan or make college savings one of the options from your Fig and Wally website. After all some of your guests to birthday parties, etc.  will want to give a toy, while others will appreciate the chance to donate to your child’s college education fund. Check out How to Use Gifting to Multiply Savings (link to other article) for more tips.

Contributed by Reyna Gobel. Reyna is a travel and personal finance journalist, television consultant and producer. Her work has appeared in Money Magazine, Reuters, Hemispheres, American Way, Southwest Spirit, and US News and World Report.