Assets held in 529 college savings accounts have reached a new record. Learn more about the trend.
Assets held in 529 college savings accounts reached a record $190.7 billion in 2012, an increase of nearly 16 percent compared to 2011, according a report released Tuesday by the College Savings Plan Network.
The total number of 529 plans increased as well, growing 3.7 percent to 11.1 million at the end of 2012, according to the report, a survey of all U.S. 529 college savings accounts. The average account size also reached a record high of $17,174, a nearly 12 percent increase for the year. Families contributed a total of $21.2 billion to 529 college savings accounts in 2012, and nearly half of all accounts saw inflows.
“We’re continuing to see families commit to investing in 529 plans as an easy and accessible alternative to borrowing and becoming saddled with student loan debt,” Hon. Michael L. Fitzgerald, Treasurer of the state of Iowa and chair of the College Savings Plan Network, said in a statement. Most plans can be opened with a minimum initial investment, and some also offer matching grants and scholarship programs.
Learn more about the different types of 529 plans.
The 529 college savings accounts, sponsored by state governments, afford families tax advantages, as well. Assets held in a 529 grow tax free and withdrawals are tax-exempt when they are used to cover qualified educational expenses. The tax savings make the plans particularly appealing to high-income earners.
Millionaires have relatively high ownership rates for a range of tax-advantaged investment products.
Ownership of 529 savings plans is highest among high net worth Millionaires, according to research from Spectrem’s Millionaire Corner. At the end of 2012, 19 percent of Millionaires with investable assets of $5 million up to $25 million had 529 college savings accounts, according to our fourth quarter study on financial product ownership. Their average balance was $107,000. Non-millionaires are significantly less likely to have assets held in a 529 plan. Nine percent of individuals with $100,000 up to $1 million to invest have 529 plans, and their average balance is $22,000.