Tiptoeing Into 529 Plans

Do you want to invest in a 529 college savings plan via dollar-cost averaging but prefer to make a single lump-sum contribution? Here are your choices:

• Reallocate your funds among the program’s investment options one time per calendar year as permitted by the IRS. That is, invest in a cash account and transfer some money into a stock fund once each year.
• Establish two accounts. For one, name yourself as the beneficiary and invest conservatively; for the other, name your child as beneficiary and use a more aggressive option. As often as desired, you could request a rollover from the conservative account to the aggressive account, tax-free.

However, these strategies are cumbersome and could be costly if the 529 plan charges a fee for rollovers.

Some 529 plans have their own dollar-cost averaging option. Your lump-sum contribution is made to the program’s money market or guaranteed investment portfolio, and a portion of it is automatically transferred to a different investment portfolio on a set schedule.