How to Transfer Mutual Funds to College Savings

Mutual funds are safe investments, but still carry some risk.

Mutual funds are bundles of stocks. They are a good investment option for all types of investors---particularly those who are unfamiliar with the markets and interested in mitigating their risk. Moving funds from a mutual fund to a college savings account may be a safe change, but it also may reduce the amount of interest you ultimately earn.

Things You'll Need

• Mutual fund account number
• Account number for new savings account
• Mutual fund statements (12 months)

Instructions

1. Find out the interest yield on the new college savings account (if it is new). Compare your mutual fund statements from the last 12 months (specifically the rate of return) to determine what kind of a return or loss you'll experience by transferring your funds.

2. Consider investing in a 529 Plan. These are specifically designed to help parents save for a child's education. The accounts are offered in all 50 states, and often come with significant tax advantages (sometimes contributions are tax-free). When it comes time to pay tuition, withdrawals from these accounts are not penalized in terms of taxes.

3. Log on to your mutual fund online. If you do not yet have an online portfolio, create one using your name, address, Social Security number, phone number and account number. Access your mutual fund information.

4. Choose the option to transfer funds. If you'll be liquidating your mutual fund, you may want to call the broker or financial adviser who handles your investments to oversee the cancellation of your fund. (Be prepared for him to try to retain your business.)

5. Enter the account number for the savings account, money market account, or 529 account where the funds will be transferred. This will be a secure, electronic wire transfer between financial institutions---there is no need to worry about losing your funds in the transaction.

6. Click on "Confirm" to authorize the transfer. Some mutual fund companies may make you wait a day or more to transfer funds so that they can verify the legitimacy of the new bank account. If this is the case, wait until you receive confirmation, then repeat Steps 3 through 5.

7. Confirm that the funds arrived safely at your new college savings account. Follow up with your financial adviser or broker (if applicable) to confirm that your mutual fund account is closed.

References

• Bankrate: Mutual Funds vs. EFTs
• Bankrate: Mutual Fund Worksheet