The new figures, from fund researcher Morningstar Inc., show that investments in 529 plans fell an average of 9.5% in the third quarter and are now down 5.9% this year through Sept. 30. That isn't as large as the broader market's drop.
Whether you’re a parent or a grandparent, one of the hallmark ways of preparing for the upcoming generation is the college savings 529 plan. There’s a bit of bittersweet news there nowadays: overall funds are down, but the alternatives even lower.
According to a recent Wall Street Journal article, and Morningstar research, investments in 529 plans fell an average of 9.5% in the third quarter and are now down 5.9% this year through Sept. 30. This marks the worst setback since the market crash in early 2009. Of course, thanks to market volatility and several rounds of bad news from around the globe, the Standard & Poor's 500-stock index fell 14% and 10% over the same periods. Further, while the S&P has been fairly flat over the past five years, the average 529 plan has returned 4.6%, and accumulated earnings are still tax free.
It just may be, as many uphold, that the 529 is still a great option if you have a future student for whom you need to plan. Indeed, especially for grandparents, the current tax environment might be especially helpful. Whatever investment vehicle you choose, your help and proper planning may be more important now than ever before as the last five years also have seen tuition and fees increases by as much as 38% for in-state, public college students and 30% for private college students.
Reference: The Wall Street Journal (October 18, 2011) “Bad Marks for College-Savings Plan May Not Call for a Time Out