Checking the health of 529 college savings plans
Kids & Money
you’ve opened a 529 college savings account, you may wonder if it’s looking
good. You look at your account balance and think, “How do I stack up? Am I on
maybe you’re thinking about opening a 529, but you’re hesitant because you
don’t understand how they work and how much money can be put in them. Or maybe
you’ve heard that you can get federal tax benefits, but you’re unsure whether
your state offers income tax deductions or credits.
can you get the information?
data from surveys taken by several college savings organizations offer some
measuring sticks on the popular 529 accounts, which are offered by nearly every
state and provide tax-free benefits on distributions used for qualified
investments in 529 plans reached a record $328.98 billion at mid-2018,
according to a survey by the College Savings Plans Network (www.CollegeSavings.org).
300,000 new 529 accounts were opened in the first half of 2018, bringing the
total to 13.6 million accounts, the savings organization said.
average amount of money in a 529 increased to a record $24,153, as of June 30,
the network said.
80 percent of parents are savings regularly for their children’s college
education, with more than half saving monthly, 19 percent saving quarterly, and
8 percent annually, according to the College Savings Foundation survey of about
42 percent of parents said they are savings more than they were a year ago, up
from 38 percent in 2017, the foundation said.
all is well?
not. Despite the savings growth, the foundation noted that nearly two-thirds of
the parents surveyed plan to borrow to pay for their children’s college, with
62 percent relying on education loans and 18 percent tapping credit cards or a
line of credit.
they started late, right? Or, they underestimated how much they’d need to cover
the college tab.Whatever the reason, many parents still find the need to take
on debt. One other data point deserves attention: The number of families using
529 plans to save for college.
to the College Savings Foundation survey, 50 percent of the respondents have a
529 in place. The accounts, launched about 20 years ago, are “coming of age,”
said Richard Polimeni, chairman of the foundation.
pointed out that when the 529s were introduced, Baby Boomers’ oldest children
were close to college age and therefore saving for college in these accounts
were not a priority. “Now we have a new generation that has grown up with a
savings account specifically designated for college,” Polimeni said.
research from Savingforcollege.com, an organization devoted to providing consumer resources on
529 plans, showed that less than 18 percent of children under age 18 have 529
of the problem is a lack of awareness of 529s. Savingforcollege found that less
than a third of parents surveyed know about the accounts.
retirement plans, you learn about a 401(k) and other qualified retirement plans
when you meet with human resources after being hired,” said Mark Kantrowitz,
the website’s publisher and vice president of research. “But when you have a
baby, the hospital doesn’t give you a guidebook about raising a baby and saving
for college. You’re lucky if someone tells you about 529 plans.” That’s why
Savingforcollege has started a campaign to inform parents about 529s.
Information is available at www.savingforcollege.com.
surveys are snapshots in time and should be taken with some skepticism, it’s
clear that many families are struggling to save for college or are not aware of
one of the best ways to get started.
Kantrowitz said, just having a 529 plan “sets up an expectation that the child
will go to college, which increases the odds that the child will enroll in and
graduate from college.”
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