529 sales rising, with accounts for summer school, K-12, apprenticeships

Sales in 529 accounts shot up by nearly 19 percent in the second quarter of 2024 compared with a year prior, as parents kept investing for education or put money into ABLE accounts.

That’s according to data published this week by ISS Market Intelligence, which found that total assets in 529 plans are up by 13.3 percent over a year, going from $426.9 billion to $483.7 billion.

“The story board for net flows primarily relates to growing in gross distributions and more families using 529s to successfully pay for education. Many of the initial wave of 529 users are reaching college age, and so they are successfully using 529s for their intended purpose,” said Paul Curley, director of 529 and ABLE solutions at the company, in an email. “Additionally, qualified expenses for 529s continue to successfully expand, and an estimated 5 percent of 529s are now used for K-12 tuition.”

On a net basis, flows were lower than during the second quarter of 2023, due to assets in the accounts being distributed to pay for college or other eligible expenses. Such distributions increasingly seem to be made to pay for summer school, Curley said.

“With families seeking to reduce learning loss during pandemic school closures, more families are opting to use 529s for early education which includes tuition for summer school at public schools,” he said.

And a growing use of 529s is to pay for apprenticeships or graduate school, with an estimated 12 percent of accounts funded for those purposes, he said.

Data from surveys conducted by ISS show financial advisors’ interest in 529 accounts rising, he said.

Ninety-five percent of advisors plan to use 529 accounts at the same rate or higher than they currently do next year, and more than three quarters said they see 529s as “multigenerational tools.” In part, that is because 529s can be distributed to Roth IRAs, something more than a third of advisors said they want more guidance about.

As of the second quarter, the fastest-growing program manager in the 529 world was Fidelity, which saw a 14.8 percent increase in assets year over year, according to ISS. At $45 billion, it is the third-largest program manager, behind American Funds ($93.2 billion) and Ascensus ($131.4 billion).