how do i set up a 529 plan?

Question

this is a gift for my goddaughter...i want to start the fund and let others contribute if they want.

Answer 1

Check first at what state will you open your 529 plan and inquire with the state's agency that handles the 529 plan. Your choice will depend on the performance of the plans, as well as the possible tax deduction you can get from the contributions if you use your state's 529 plan.

In Virginia, for example, American Funds manages the 529 plan and they require you to open your plan through a broker (not directly). In some states, you can simply download the form and apply to open your 529 plan

Here are some sites with detailed information on how to open a 529 plan

http://www.savingforcollege.com/college_savings_201/
http://www.kiplinger.com/basics/archives/2003/02/529faqs.html
http://www.smartmoney.com/college/investing/index.cfm?story=529calc

Answer 2

1. There are many 529 plans - every state has one or several providers.
2. 529 plan contributions are typically deductible from your STATE income tax (not federal). However, you can invest in plans set up outside of your state - you will not get the deduction off your state income tax in this case but it probably won't be that large (check that though)...
3. ALWAYS TRY TO FIND A LOW COST 529 PLAN ADMINISTRATOR...Just like any other investments, reducing costs is the easiest and most reliable way to boost your returns. If at all possible - explore NO LOAD mutual fund providers (like VANGUARD)....A lot of funds charge you a fee (load) and ost brokers will not actually go over that in much detail. This fee is simply charged by the fund and paid out to the broker that sold you the product. With so many tools available today in terms of books, websites, etc.. you can REALLY do a decent job of picking the funds ..PLUS most no-load providers offer enough advice and guidnac to pick what's right..(most plans will have age-based options that will automatically rebalance the portfolio for you as you child gets closer and closer to school)..
4. Read 3 again - reduce costs as much as possible...In addition to paying attention to load vs no-load funds you should check out the funds expense ration (this is how much the fund itself spends in administrative costs, office rent, salaries, trading costs, etc..).

Answer 3

There are multiple different types of 529 plans out their and the best way to set one up would be to contact a financial advisor so he or she can do the research to decide which is best for what your looking. In the past i've placed clients in Fidelity's 529 plan. They have aged based portfolio's which get more conservative as the child gets closer to using the funds. 529 plans are great due to the large amount that you can contribute in one year (which is 5X the tax free gifting amount) There is so much info. on 529's that it would be easier to contact your advisor or me!!! Hope this was helpful

Answer 4

Contact the state treasurers office in the state you intend to set up the 529.

Answer 5

It's really easy. The only question is which state you are going to use. The state she lives in might have special benifits for her. I'm in both NY's and IL's and both of those take like 15 minutes to set up.