Even with the market volatility, Joel Dickson, global head of consulting methodology at Vanguard, said the fundamental value of 529s as a tax-advantaged way to save for education has not changed.
“It still makes a lot of sense,” he said.
At Edward Jones, the annual survey shows that while respondents want to save for college, two out of three don’t know what a 529 plan is, said Steve Rueschhoff, the firm’s director of managed investments.
Overall, the plan’s 529 assets, reflecting deposits and investment earnings, reached nearly $409 billion in the first quarter of this year – down from $432 billion a year ago, but more than 5% above the $388 billion in the previous year. end of 2022.
Despite recent market fluctuations, 529 plans offer a way for families to reduce the amount they need to borrow for college, Biar said. The College Board estimates that the median annual cost in the state of attending a four-year public college is $27,940, while the cost of attending a four-year private non-profit college is $57,570.
“We still want people to consider a 529,” Biar said, adding that most plans have conservative options, including federally insured savings accounts, for people who can’t tolerate risk.
The College Savings Plans Network has been working to expand awareness of college savings plans and has encouraged legislation that expands permitted uses to 529 funds. Congress, for example, expanded the allowable use of 529 funds to allow families to save for educational expenses beyond college costs, such as tuition for kindergarten through grade 12, as well as for learning. Also, up to $10,000 from a 529 can now be used to pay off student loans.
Starting next year, under the Secure 2.0 Act enacted in 2022, “left over” funds in a 529 plan can be transferred into a Roth Individual Retirement Account for the 529 beneficiary. because some families may refuse to contribute to a 529 for fear of paying taxes and penalties if they don’t spend all the funds in the account – say, because their child doesn’t go to college – and withdraw the money for other purposes.
