Most Clients With Over $250,000 In Assets Fail To Take Advantage Of College Savings Plans

Wednesday, August 01, 2012 07:11
Most Clients With Over $250,000 In Assets Fail To Take Advantage Of College Savings Plans

Tags: 529 | client education | financial planning | investment strategies

A new Legg Mason survey of 1000 wealthy individuals with over $250,000 in investible assets shows that college costs are being covered from ordinary income instead of tax-favored programs like 529 plans.

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As many as 85% of respondents fell into that category and 83% of those anticipating sending their children to college confirmed they would be drawing on their income to cover tuition expenses.
Less than half of wealthy Americans are using regular savings and non-qualified resources but 65% not yet paying for college do plan to tap these set-aside funds. By not utilizing the tax advantages of 529 plans, these investors are losing the compound earning effect of the savings plans.
Even those who are well-heeled have underestimated the costs of a college education and have underprepared, which is costing them more based on the tax advantages and compounded effect they could have had. Of those whose children had already graduated from college, 92% used income, 59% used savings, and 36% used 529 plans.
Parents seem to have good intentions but have failed to plan adequately or to create a strategic plan that would multiply the benefits of their savings. Different state plans have different advantages so it is worth investigating the advantages offered in your clients’ states and helping them to plan strategically as early as possible.


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