Why do Americans of all wealth levels continue to pour money into 529 college savings plans? The answer is simple: the cost of higher education is skyrocketing. More and more advisors are counseling their clients to start shoveling money into 529s now so they won't be blindsided when it's time to send their kids to college.
On average, parents can expect to fork out about $40,000 per year to ship Junior off to a private college, says Paul Frichera, director of product management and sales support at MFS Investment Management in Boston. Frichera notes that even state colleges and universities are charging more than $20,000 per year.
It's no wonder that by the end of the first quarter, parents had invested approximately $40 billion in 529 plans. That's a 13.9% increase in total assets invested in these plans at year-end 2003, and an 87.5% jump from first-quarter 2003 assets, according to Financial Research Corp. in Boston.
One of the biggest benefits of investing in a 529, Frichera says, is that an investor can "put in a lot of money upfront." If an investor "really wants to jumpstart a 529," he says, "they can put in an average $250,000 depending on the plan, and let that grow immediately." As Investment Advisor's directory of 529 college savings plans that follows shows, investors in the NJBEST 529 College Savings Plan and the Franklin Templeton 529 College Savings Plan can contribute a whopping $305,000 at one time.
The MFS 529 College Savings Plan, sponsored by Oregon, is distributed nationwide through advisors, but Oregon residents can purchase it directly from the state through vendors. Only two years old, the plan has already pulled in a healthy $150 million in assets. "It's not one of the large [plans]," Frichera says, "but we have some good momentum behind the product." MFS's plan should continue to do well, as it's the advisor-sold plans that continue to pull in the majority of 529 assets, says Joe Hurley, CEO of Savingforcollege.com.
