After growing for two consecutive years, investments in 529 college savings plans dipped in 2005, according to The Wall Street Journal.
Net investments in both existing and new accounts went down to $13.69 billion from $13.72 billion the previous year, as per the Financial Research Corporation. The slip might be due to the recent increase in scrutiny, said Joes Hurley, president and founder of Savingforcollege.com.
Although new investments fell, 529 assets rose to approximately $68.4 billion, a 31% increase from 2004.
"Awareness of the program is still fairly low," said Brian M. Boswell, a research analyst at FRC. "It's a matter of getting the advisers and the brokers on board."
Another thing that is holding 529 account growth back is the fact that Federal tax provisions are scheduled to end by the year 2011, noted Chuck Toth, director of education savings at Merrill Lynch. "If Congress could hopefully move to make those tax advantages permanent, it would go a long way to increasing the business," Toth said.
Also, 529 fees are high, and brokers tend to recommend programs that benefit themselves, which is another reason why they are not gaining in popularity.
The staff of Money Management Executive ("MME") has prepared these capsule summaries based on reports published by the news sources to which they are attributed. Those news sources are not associated with MME, and have not prepared, sponsored, endorsed, or approved these summaries.