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INDUSTRY UPDATE:
529 Plans - Where Are They
and Where Are They Going
As 2004 begins, 529 College Savings Plans continue to grow in consumer
popularity and are beginning to join the main stream of investment options
available to families seeking a tax advantaged way to invest for college
expense.
Research indicates that there are currently over 4 million accounts open
nationwide with estimates indicating that by the end of 2010 there will
be approximately 300 billion dollars invested in 529 Plans across America.
The reason for this seems obvious, there are currently more than 70 million
children under the age of 18 for whom parents are struggling to save money
for college.
During the 2002/2003 academic year tuition and fees at 4 year public
institutions rose by almost 10% and private colleges and universities
had a tuition and fee increase of almost 6%. While scholarships and financial
aid will assist with this ever increasing cost of a 4 year education,
it is important for families to begin saving as much as they can for college
expense. The 529 College Savings Plan continues to afford families a tax
advantage way of doing so.
As the 529 Plan industry matures, we are seeing an increase in the number
of services and opportunities for families saving for college. Specifically,
the microinvesting "trend" appears to be gaining speed.
Microinvesting is a term used to describe the "rebate" or "free"
money being offered by merchants for shopping at their stores. Similar
to airline miles, several 529 related businesses offer rebate dollars
which can be directed into your 529 College Savings Plan to assist with
long term savings.
As 2003 came to a close we saw an increasing number of families using
the 529 College Savings Plan as a gift making vehicle. The 529 Plan was
used to transfer assets from a parent or grandparent into a 529 College
Savings Plan as part of both an education savings plan as well as a gift
giving strategy. Industry experts expect this trend to continue as 529
College Savings Plans take hold with key advisors and financial and estate
planners.
While many of the 529 Plans being offered are sold through advisors,
it is the Accounting industry and Estate Planning industry that will have
the greatest effect on the use of 529 Plans as a gift-making vehicle.
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