529 plans gain assets and traction

Parents who use Section 529 college savings plans are steadily outpacing those who don't use the tax-advantaged investments, according to a new survey by the College Savings Foundation. About 76% of the parents with a 529 plan have saved at least $5,000 per child, compared with 29% who saved this amount for college without one, the national survey found. About a quarter of the 843 survey respondents said that they were saving for college with 529 plans. The survey also demonstrated that some savers are using 529 plans to accumulate significant coffers for college. About 11% of 529 plan owners saved more than $100,000 per child, compared with 3% who have saved this much without one. About 20% of those with 529 plans have saved between $10,000 and $25,000 per child and another 20% have saved between $25,000 and $50,000 per child, the survey said. Half of the 529 holders cited the rising cost of college as the reason for choosing the plans. The ability to transfer the accumulated savings between children is the reason that 39% of parents with 529 plans said that they chose this tool for savings. “529 college savings plans are designed to meet each saver's time horizon and risk tolerance,” said Roger Michaud, chairman of the College Savings Foundation. Savers have investment options based on age-based portfolios, growth-oriented investments such as equities and conservative investments such as certificates of deposit, “which are particularly important as a child reaches college age,” said Mr. Michaud, who also is senior vice president of Franklin Templeton Distributors Inc., which manages New Jersey's adviser-sold 529 plan. The fifth annual survey also found that parents are more on top of their savings needs, with 34% — the highest level in four years — saying that they know how much they need to accumulate for their kids' college costs. Last year, 27% gave that answer. Email Liz Skinner at [email protected]