The current economic crisis has everyone gun-shy when it comes to long-term investments.  What makes for a sound investment, especially when it comes to something as important as your children’s education.  “529s” – basically Roth IRAs for education – had gained favor with investment counselors in the last decade, but how do they stack up in today’s economy? According to the expert there are some good ‘guaranteed’ college savings plans for families to consider, but before you jump in, get the facts.

One attraction for signing on to a 529 is tax breaks – these accounts are tax-free if the fund is used for tuition and school supplies.  Depending the length of the investment and a families tax bracket, these tax breaks can add up.  But not all 529s are created equal and the current recession may be compromising the ability of some 529s to deliver on their promise.

Understanding the ins-and-outs of 529 plans can be complicated, cautions Andrea Feirstein, a consultant who has published a recent analysis of the guarantees behind various plans.  You can find a safe, well-managed plan she says, as long as you do your homework.  “It’s all about asking the rights questions,” she cautions.  But what are the questions?  Here’s an outline of what you need to ask:

1. Find out what kind of 529s are available to you – not all are alike and not all are created equal.
2. Is a pre-paid plan right for your family, and is your child likely to attend a college or university that participates in a 529 plan?
3. What happens if your child opts not to attend a participating college or university?
What if your child decides to defer his or her college acceptance?  Or apply after graduating from high school?
4. Is your child young enough to participate and truly benefit from a 529 plan?
5. Is the plan you are considering truly ‘guaranteed’?
6. Does your state give additional tax breaks for contributions made to a 519 plan?
7. Does a 529 impact on your child’s ability to get college loans and grants?
8. Does your 529 plan allow you to transfer the funds to a third party?
9. Does your state have a specific window of time to make contribution to a 529 fund?
10. What are the fees involved in setting up and maintaining a 529?

Because the regulations and rules vary from state-to-state, you may want to get specific answers to these questions from a qualified investment counselor.  However, there are some on-line sources, like Saving For College that have valuable information.  Before you sign-on to a 529 plan, make sure you understand the terms of the plan, the quality of the guarantee, and any hidden fees or terms.  A 529 can be a great way to start saving for your children’s education, but make sure you get the plan that is right for you and your family.