3. Compare options among 529 plans: Parents and grandparents who aren't happy with one plan's age-based offering can consider age-based options among other 529 plans within or outside their state. According to Morningstar's "2011 529 College Savings Plans Research Paper and Industry Survey" author Laura Lutton, "One plan may get less equity heavy when the child turns 3 while others may stay constant until age 5 or older."
4. Re-evaluate as needed: Parents don't have to stick with one investment strategy forever. Re-evaluate annually or when children cross the next age threshold within the chosen plan. For instance, parents may to look at the value of their account and want to add more risk because their child is 7 and they'd like a bigger opportunity for their money to grow. And parents with a 16-year-old may opt to switch to a more conservative plan. Generally, even the most aggressive age-based plans will reduce riskier investments as kids age.
"College savers should make sure that they're comfortable with the risk they're taking on each step of the way," Lutton says. "If the age-based options seem too risky, you could add a cash option as a second investment in the plan, or you could add an equity option if you want to take on more risk."
Reyna Gobel, frequently quoted as an expert on student loans and college costs, is the author of "Graduation Debt: How To Manage Student Loans And Live Your Life" and "How Smart Students Pay for School: The Best Way to Save for College, Get the Right Loans, and Repay Debt." She has appeared on PBS's Nightly Business Report and speaks regularly at CollegeWeekLive.