529 college savings plans gain flexibility

Families with 529 college savings plans have more flexibility this year if they experience second thoughts about their investments.

Usually, the Internal Revenue Service limits the number of times you can switch investments to once a year.

(The only other way to switch investments is by changing beneficiaries.)

But after last year's horrendous market, the IRS relented - a little. For this year only, you will be able to change investments twice.

The College Savings Plan Network, made up of state-sponsored 529 plans and others, wrote the IRS in December asking that account holders be able to switch investments two to four times a year.

The problem last year was that many account holders made adjustments to their investments early in the year - long before the stock market sank like a stone. By the fall, they were stuck with their choices. And if they were heavy into stocks, they could easily have seen their portfolios fall 30 percent or more.

The question now, though, is should you be making changes? Dump investments that are now down and you will be locking in those losses.

The answer is easiest for those with very young children. You can stick with a portfolio high in stocks - even if you lost money on paper last year - because you have time for the market to recover.

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