CNN Money: Should I cash out the brokerage account I’ve been using for college savings and switch to a 529 plan?

In answering a question on CNN Money as to whether college funds accumulated for an eighth-grader should be moved to a 529 plan, Dave offers the following perspective:

Another plus, as San Francisco financial planner Dave Yeske points out, is that 34 states currently allow a partial or complete income tax deduction for contributions made to 529 plans. (For more on tax deductibility, check your state’s 529 plan site, which you can find a link to at savingforcollege.com.) You may have to use the plan sponsored by your state to get that state tax deduction, but you are otherwise allowed to contribute to any state’s plan, which means you do have some ability to shop around for the best fund choices and lowest costs. Unsued funds can be redirected to a younger sibling if you end up paying for more than one college education.

However, make certain that any funds that are moved into a 529 will, in fact, go toward education expenses. If money is withdrawn from the plan for any purpose other than qualified higher education expenses, gains will be subject to both taxes and penalties. So don’t put all of your savings into the plan unless you’re pretty sure it will all be needed for college.

Yeske also urges you to carefully consider how aggressively you want to invest the funds. With college only four years away, you’ll do well to shifting to a more conservative allocation.

Ultimately, one must balance any potential tax benefits against the limits on investment choices and flexibility with respect to distributions.