Administration March 11, 2003

Study: Overall Reluctance to Use 529s

November 3, 2003 (PLANSPONSOR.com) - The market downturn created a "reluctance" to use 529 college savings accounts for the costs of higher education, in part because of overall low investor awareness and a perception that the plans are complex, according to a survey.
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However, according to research by MFS Investment Management, the awareness and usage of the college saving plans varies significantly by age group. Specifically:

  • Three quarters of matures (born 1909 to 1945) saving for college use 529s
  • Baby boomers (born 1946 to 1964) are more likely to be aware of 529 plans, saving for college in general and using 529 plans as a college savings vehicle. Seven in 10 use 529s.
  • While Generation Xers (born 1965 and 1978) remain least aware of 529 plans, the majority of investors within this demographic saving for college use 529s as the primary vehicle for doing so.

The advisor survey also found that:

  • Asset control, coupled with the availability of an age-based portfolio, is the most important feature when selecting a 529 plan.
  • Both matures and boomers place heavy importance on tax implications, while in terms of estate planning, matures consider it a critical feature of plans and boomers have almost no interest in it as a deciding factor.
  • For matures, the newness of the estate planning feature and its ability to move a significant amount of assets out of an estate quickly, is appealing.
  • Generation Xers, with a longer investment time frame, seek aggressive growth in their investment selection.

The Web-based, self-administered survey was conducted during May and June 2003 and covered   307 advisors.

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