Despite the considerable tax benefits 529 college savings plans offer, numerous parents still do not have a 529 plan, a recent survey by Hartford Financial Services Inc. found. Those surveyed had an average age of 43, well within the trailing edge of the boomer generation.
Although Hartford found 73% of parents have started some sort of college savings program, 70% said they were not using a 529 plan, even after the tax benefits of these plans were made permanent by the Pension Protection Act of 2006.
Results from the survey suggest that financial advisors need to educate clients with children in the tax advantages of 529 plans, says Jeff Coghan, director of Smart529 Programs at Hartford. Smart529 is the college savings plan administered for the state of West Virginia by Hartford.
Coghan notes survey results showing 26% of parents working with financial advisors knew a lot about 529 college savings plans, compared to only 15% of those who didn’t work with a financial advisor, Hartford found.
Moreover, 45% of parents working with a financial advisor own a 529 plan, compared to just 26% of those who don’t work with an advisor. Also, 64% of parents using an advisor view the advisor’s 529 plan advice as extremely important.
The financial advisor can play a critical role by helping parents get started and adjust their saving strategies as their savings program builds, Coghan says. Supporting his point is the survey finding that 31% of parents started saving for college as a result of discussions with their financial advisor. Among parents already saving for college, about 25% said they increased their contribution after talking with an advisor.