Have 529 Plans Peaked? College Plans Deflated 10% Last Quarter As Redemptions Passed New Flows
- Created: Tuesday, 22 November 2011 08:18
According to Financial Research Corp., 529 assets dipped 10% over the last quarter to an anemic $134 billion.
This was the first decline since the credit crunch and reflects the fact that a lot more of these 14-year-old accounts are now being used to pay for school.
In other words, the first investors in the college funding market are leaving the "accumulation" phase and starting to spend down their assets.
Last quarter's big dip reflects this because school started in September and tuition checks were due.
Year over year, assets were up 5%, more or less in line with the market.
That is not great, given the theory that people are making regular or even automated investments in their accounts.
And it seems that the relatively expensive advisor-sold versions of the plans are suffering the worst of it.
FRC says advisor-sold 529 plans -- which carry sales loads and often higher management costs -- deflated $577 million over the quarter while direct no-load versions brought in $233 million.