Maximize your 529 college savings plan

Maximize your 529 college savings plan from Boston.com

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While the stock market decline has taken its toll on all investments -- from retirement plans to college savings -- certified financial planner Deborah Levenson says that you should not give up on 529 plans for college savings.

When managed correctly, 529 college savings plans can help ease the financial burden that the high costs of college can bring. Here are eight tips from Levenson on how to get the most out of your 529 plan.

1. Start early

It is important to start investing as early as possible. The power of compounding makes contributing while your child is in diapers very worthwhile.

2. Go direct with 529

Open a direct-purchase 529 plan instead of a broker-sold plan. By eliminating an extra layer of expenses you are more likely to improve your returns.

3. Check the breaks

Check whether there is a tax break in your state. You may be able to use 529 plan contributions to reduce your state tax burden.

4. Automate

Set up an automatic deposit each month from your checking account. By automating the process it will be easier to stay on track and you will be dollar-cost averaging into the account.

5. Make it age-appropriate

Choose an age-based investment option. By doing so, the custodian will automatically reduce the equity-exposure of your child's accounts as they get closer to attending college.

6. Follow the index

Look for index investment options. Many plans managed by Vanguard or Fidelity offer index-based investment options, offering very low expense ratios compared with managed investment options.

7. Look at the plan ratings

This spring Morningstar identified these plans as the "best 529 plans": Indiana's College Choice Direct Plan, Ohio CollegeAdvantage, Utah Educational Savings Plan, Virginia's CollegeAmerica, and Virginia's Education Savings Trust. A great place to learn more about 529 plans is www.savingforcollege.com, which provides independent rankings as well as performance reporting.

8. Load from the front

If you can afford to, try to front-load your contributions. This year you can contribute up to $65,000 per parent by forward-gifting five years of contributions (you can double this if both parents make gifts.)

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