Grandparents' Choice: IRA or 529

Grandparents are getting into the act on 529 college-savings plans.

Those 529 plans are tax-efficient and fairly user-friendly. Plus, they are increasingly becoming a family affair as more grandparents get into the act.

In fact, grandparents are thinking about their grandchildren's education almost as much as their own retirement. A recent survey by the Hartford found that 66% of grandparents will probably or definitely spend time planning for college education in the next five years.

TheStreet.com checked in with Jeff Coghan, director of 529 plans at Hartford Financial Services, to learn more.

TheStreet.com: It's understandable that grandparents want to help contribute to their grandkids' education fund, but shouldn't they be worrying about their own retirement needs?

Coghan: Grandparents certainly should consider their own retirement finances before thinking about helping their children save for their grandkids' education. But once they are in a position where they are comfortable with retirement, then helping a grandchild go to college is something they have shown a lot of interest in.

TheStreet.com: What's the best way for grandparents to get involved?

Coghan: One way is to set up their own 529 plan and contribute directly. The other is to team up with their children to create an account where the parent is the owner and the grandparent makes contributions over time.

The best way to give money depends on the financial situation of the giver. You can make a lump-sum payment, or perhaps start a dollar cost averaging program that comes out of a checking account on a monthly basis. And there is nothing better than just lumping in small gifts on birthdays and graduations.

TheStreet.com: What about choosing the best plan? Do you just treat it like any other investment?

Coghan: Absolutely, but there is even more of a reason to plan ahead because you have a short time horizon to work with especially once the child goes off to college. That means taking state taxes into account [as well as] costs and certainly performance.