college

Age-based 529 plan adjusts automatically

"If the market has been growing, but that quarter you're down and you're taking your equity down from 90 percent to 70 percent, you could be locking in significant losses," Jobe says. If you're in a year-of-enrollment portfolio that shifts assets more gradually, you're not as likely to be subject to that dramatic a change.

Asset shifts vary from plan to plan. For example, the Bright Directions adviser-sold plan within Illinois's 529 program doesn't start to shift assets until the beneficiary turns 8 years old. Meanwhile, Alaska's enrollment-based plan shifts funds every three years. To make sure your investments will shift over a time frame you prefer, learn the timing of asset shifts and keep an eye on the market to ensure the timing makes sense.

Avoid autopilot

Age-based portfolios are designed for investor ease, but plan holders still should monitor the investments in their 529 plans.

"(Parents) should have a realistic goal of how much needs to be in that account," says Michael Cecere, a CPA and partner in Gray, Gray & Gray LLP, an accounting firm in Westwood, Mass. If it doesn't reach that amount by a set time, they should shift it to another type of asset.

The best way to come up with a realistic goal is to carefully evaluate the past performance of a 529 plan before signing on, Cecere says. Once parents already are enrolled, they should periodically check their portfolio to make sure their investments are meeting goals.

"Work with a financial adviser if you don't have time to keep on top of it," Cecere says. "After you've done the research and put yourself in the best possible position, that's all you can really do. What happens after that is out of your hands."

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