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INSIDE 529: THE ASCENSUS COLLEGE SAVINGS PLAN REPORT Trends from the Unite速 529 Platform | Vol. 2 | May 2016


COLLEGE SAVINGS 101 Ascensus College Savings (ACS) is a recordkeeper and administrator of over 3.5 million 529 plan accounts, representing over 27% of the total 529 plan accounts administered across the nation.1 We currently provide services for 31 plans across 17 states with over $71 billion in assets under administration.2 The accounts on our platform are a representative cross section of 529 plans, including both advisor-sold and direct-sold plans, plans from states with a significantly wide demographic range, and those from states with variations of 529 tax incentives. As one of the largest recordkeepers in the industry, we’re in a unique position to shed light on how families are using 529s to save for post-secondary education. In this report, we’ve identified key trends that reflect how savers are leveraging our plans to manage rising college costs and expenses. With this insight, we hope to continue to drive industry advancements to make saving for education accessible and affordable for millions of American families.

As this report highlights, and our president Jeff Howkins has said, “We work to make saving easy through accessible and affordable 529 college savings plans, as every dollar saved for college is one that doesn’t have to be paid back with interest.”

Percentage calculated based on College Savings Plan Network’s March 2016 529 Report: An Exclusive Year-End Review of 529 Plan Activity. 1

2

As of 3/31/2016

*All Ascensus College Savings data referenced in this report is as of 12/31/2015 unless otherwise noted. The statistics in this report are reflective only of the accounts on the ACS Unite 529 platform, not the entire 529 industry. The Ascensus College Savings companies that provide recordkeeping services are Ascensus College Savings Recordkeeping Services, LLC and Ascensus Investment Advisors, LLC.


MAKING SAVING FOR COLLEGE MORE MANAGEABLE

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The maximum individual contribution amount per year for a 529 is currently $14,000 per beneficiary to qualify for the annual federal gift tax exclusion.* Section 529 of the Internal Revenue Code allows a donor to contribute up to five times the maximum annual amount for a designated beneficiary in a single year (currently $70,000, or $140,000 for married couples electing to split gifts) and apply the contribution proportionately over a five-year period.** The minimum contribution amount varies, but most plans permit contributions of $25 or more. Plans also have maximum contribution limits, although often they are over $300,000.

Individual contributions During 2015, Ascensus College Savings processed over 18 million individual contributions to 529 accounts. Approximately 62% of contributions were $100 or less. 95% of contributions were under $1,000. This suggests that 529 savers may be opting to make smaller contributions more frequently over time in order to make the college savings process more manageable.

% OF TOTAL CONTRIBUTIONS

61.6% 13.5% 8.2% 7.5%

$100 or less

$101 - $200

$201 - $300

$301 - $500

4.6%

$501 - $1,000

4.6%

$1,000 and greater

College savings can be built gradually over time at the rate that suits savers’ financial situations. Every bit of savings can make an impact on reducing future debt.

*$14,000 is the current limit that an individual can gift for one beneficiary in a year that qualifies for the annual federal gift tax exclusion ($28,000 for a married couple that elects to split gifts). Plans also have maximum contribution limits. **In the event the donor does not survive the five-year period, a pro-rated amount will revert back to the donor's taxable estate.


TAKING A PROGRESSIVE APPROACH

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Annual contributions over time

% OF TOTAL ACCOUNTS REPRESENTED

Over 60% of accounts had total annual contributions of $2,000 or less, and nearly 77% of accounts had total annual contributions of $4,000 or less. Fewer than 4% of accounts had total annual contributions of $14,000 or more.* This annual contribution data indicates that the majority of families are saving modestly and progressively over time rather than in larger lump sums.

50% 45%

Over

2013

60%

40%

of all accounts had annual contributions of $2,000 or less.

35% 30% 25% 20% 15%

Fewer than

2014

4%

Approx.

77% of all accounts had annual contributions of $4,000 or less.

2015

of all accounts had annual contributions of $14,000 or more.

10% 5% 0% Less than $1,000

$1,000 to $2,000

$2,000 to $3,000

$3,000 to $4,000

$4,000 to $5,000

$5,000 to $6,000

$6,000 to $7,000

$7,000 to $14,000

More than $14,000*

ANNUAL CONTRIBUTION RANGE

Accounts with no contributions during this time period were not included in the analysis in this section in order to focus on those accounts that were active and receiving contributions. *$14,000 is the current limit that an individual can gift for one beneficiary in a year that qualifies for the annual federal gift tax exclusion ($28,000 for a married couple that elects to split gifts). Plans also have maximum contribution limits.


Our 529 contribution data indicates that the majority of families are saving modestly and progressively over time rather than in larger lump sums.


As more employers add 529 plans to their employee benefits line-up, there has been a considerable jump in the number of account owners making 529 contributions through payroll direct deposit.


OFFERING MORE WAYS TO SAVE

6

Automated savings methods At Ascensus College Savings, we are always looking for ways to streamline the savings process for account owners. For this reason, our Unite 529 platform is configured to receive and process both payroll direct deposits and recurring contributions. 529 savers seem to appreciate these contribution methods, as the usage of both continues to grow considerably. In 2015, nearly one-third of ACS 529 accounts received regular contributions set up from either payroll direct deposits or automatic contributions, typically monthly, from bank accounts. As the popularity of 529 plans as an employee benefit continues to rise, there has been a considerable jump in the number of ACS accounts using payroll direct deposit and the total dollars in contributions made with this method.

Payroll deposits

79,040

$155 MILLION

Accounts using this method

Contributions in 2015

$139 MILLION Contributions in 2014

12%

Increase from 2014

Automatic investments

1,098,103

$2.239 BILLION

Accounts using this method

Contributions in 2015

$2.051 BILLION Contributions in 2014

9%

Increase from 2014


BUILDING A FOUNDATION

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Account balance

% OF ACCOUNTS REPRESENTED

The average account balance across all 529 plans on the ACS platform as of December 31, 2015, was $20,070. This is consistent with the industry average of $20,190 as of December 31, 2015, provided by the 529 College Savings Plan Network (CSPN). 89% of ACS accounts had a balance of $50,000 or less. This data suggests that families are using 529 plans to build a foundation of savings to partially fund post-secondary education, rather than taking an “all or nothing� approach. Even if 529 dollars saved do not equal tuition expenses, they enable families to grow their college savings and ultimately reduce their long-term debt.

60% 55%

81%

50% 45%

of accounts had balances of $30,000 or less.

40% 35% 30% 25% 20% 15% 10% 5% 0% Less than $10,000

$10,000 to $20,000

$20,000 to $30,000

$30,000 to $40,000

$40,000 to $50,000

$50,000 to $60,000

ACCOUNT BALANCE

$60,000 to $70,000

$70,000 to $80,000

$80,000 to $90,000

$90,000+


This data suggests that families are using 529 plans to build a foundation of savings to partially fund post-secondary education, rather than taking an “all or nothing� approach.


Families who had the foresight to open an account early in a beneficiary’s childhood appear to be in a good position to grow their savings and eventually cover a considerable portion of college expenses.


PLANNING FOR THE FUTURE

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Account balance tied to age When a 529 plan account is opened for a young beneficiary, there is more time for the account balance to potentially grow before the beneficiary reaches college. Families who had the foresight to open an account early in a beneficiary’s childhood appear to be in a good position to grow their savings and eventually cover a considerable portion of college expenses. On average, account owners with a beneficiary up to age 5 have accumulated $9,974 in college savings. These savings would cover almost half a year’s tuition at a four-year in-state public university.

$35,000

Average ACS account balance as of 12/31/15 Median ACS account balance as of 12/31/15

$30,000 $25,000 $20,000

Average cost of one year at a 4-year in-state public university*

$15,000 $10,000 $5,000 $0 Age: 0 - 5

Age: 6 - 10

Age: 11 - 15

Age: 16 - 17

Age: 18+

BENEFICIARY AGE RANGE

*Average Published Undergraduate Charges by Sector, 2015-16. Source: The College Board, Trends in Higher Education.


MAKING EVERY DOLLAR COUNT

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Account balances as college nears

% OF TOTAL FUNDED ACCOUNTS

The chart below provides a more detailed look at accounts held for beneficiaries ages 16-17. This is typically when accounts are at their largest–before account owners start withdrawing to pay for education expenses. Approximately 70% of these account balances were less than $30,000 as of December 31, 2015.

50% 45%

Approx.

70%

40% 35% 30%

of accounts had balances under $30,000.

25% 20% 15% 10% 5% 0% Less than $10,000

$10,000 to $20,000

$20,000 to $30,000

$30,000 to $40,000

$40,000 to $50,000

$50,000 to $100,000

Over $100,000

ACCOUNT BALANCE FOR BENEFICIARIES AGES 16-17

$29,653

Average ACS account balance for beneficiaries age 16-17

* Source: Ascensus College Savings College Savings Planner. Assumes a ten-year repayment plan at 4.29% interest.

$36,504

Cost to borrow this average account balance*


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College tuition The average annual cost of an in-state public 4-year university during the 2015-2016 academic year was approximately $20,000; the average annual cost of a private 4-year university was nearly $44,000.* It appears that money saved in 529 plan accounts can cover a meaningful percentage of the total cost of college for most families.

CC 4-year in-state public university

4-year private non-profit university

4-year out-of-state public university

2-year community college + 2-year in-state public university

38%

17%

22%

48%

PERCENTAGE OF TUITION COVERED BY AVERAGE 529 ACCOUNT BALANCE FOR BENEFICIARIES AGES 16-17

Account owners with beneficiaries nearing college age have average savings totaling almost 50% of this tuition cost. * Average Published Undergraduate Charges by Sector, 2015-16. Source: The College Board, Trends in Higher Education.


In 2015, more than 90% of withdrawals from ACS 529 accounts were designated as qualified.


PUTTING SAVINGS TO USE

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Account withdrawals During 2015, Ascensus College Savings processed nearly 800,000 distributions that account owners identified as “qualified withdrawals.� These are disbursements from 529 plan accounts to cover tuition, room and board, and other higher education-related expenses allowable by Section 529 that qualify for federal tax benefits.* Over 50% of qualified withdrawals were $2,500 or less, and over 70% were $5,000 or less.

# OF WITHDRAWALS

400,000

Over

70%

350,000 300,000

of qualified withdrawals were $5,000 or less.

250,000 200,000 150,000 100,000 50,000 0 $2,500 or less

$2,500 to $5,000

$5,000 to $10,000

*The availability of tax or other benefits may be contingent on meeting other requirements.

$10,000 to $20,000

Over $20,000


GIVING THE GIFT OF COLLEGE SAVINGS

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529 gifting contributions As tuition and college-related expenses continue to increase, Ascensus College Savings aims to make saving for college as simple and convenient as possible. Through the Ugift® service, parents, friends, and family can make meaningful contributions throughout a child’s life toward the student’s education. This easy, free-to-use service enables 529 plan account owners to provide family and friends with a unique Ugift code to make gifting contributions. Friends and family that opt not to use Ugift can also make contributions to a beneficiary’s 529 account at any time by personal check. Contributions made by anyone other than the 529 account owner, but not through Ugift, are characterized as “third-party contributions” in the data shared below.

64%

2015

Year-to-year increase in total dollars gifted to ACS plans from 2014 to 2015

Ugift contributions Non-Ugift third-party contributions

2014

299%

Increase in total dollars gifted to ACS plans from 2012 to 2015

2013

$100

2012

Median Ugift amount

0

$50,000,000

$100,000,000

GIFTING CONTRIBUTIONS MADE

THE BENEFITS OF UGIFT:

GIVE YOUR GIFT AT ANY TIME


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Transaction activity

# OF GIFTING TRANSACTIONS COMPLETED

100,000

Ugift transactions Non-Ugift third-party gifting transactions

90,000

69%

80,000 70,000

Year-to-year increase in total gifting transactions made from 2014 to 2015

60,000 50,000 40,000

Ugift allows friends and family to easily and securely contribute to a child’s 529 plan account.

30,000

291%

20,000

Increase in total gifting transactions made from 2012 to 2015

10,000 0 2012

2013

TRANSFER MONEY EASILY AND SECURELY

2014

2015

CONTRIBUTE ELECTRONICALLY OR BY MAIL


LESSONS LEARNED In general, 529s are predominantly used to save steadily over the course of a beneficiary’s childhood. On average, families are saving approximately $30,000 before a child finishes high school, which can have a meaningful impact on the ability to pay for post-secondary education.* Saving for college doesn’t have to mean saving for all of college. In 2015, the majority of withdrawals from ACS 529 accounts were for $5,000 or less. By making strategic and modest withdrawals over the course of a student’s education, 529 savers are lessening their reliance on loans which could otherwise burden both parents and students with post-college debt.

Each dollar saved in a 529 plan is a dollar that won't need to be paid back with interest. *Average Published Undergraduate Charges by Sector, 2015-16. Source: The College Board, Trends in Higher Education.

17


18

$20,070

Average balance of all ACS accounts

$87,037,424

Ugift contributions made in 2015

$29,653

Average balance of accounts for beneficiaries ages 16-17

40%

Account owners with beneficiaries ages 16-17 that have at least 1 year’s tuition at a 4-year in-state public university saved


Because our business is helping you give a child a brighter future.

95 Wells Avenue Suite 160 Newton, MA 02459 Phone: 617-454-6400 ascensuscollegesavings.com

Before investing in any 529 plan, you should consider whether your or the designated beneficiary’s home state offers a 529 plan that provides its taxpayers with state tax and other benefits that are only available through the home state’s 529 plan. You also should consult your financial, tax, or other advisor to learn more about how state-based benefits (or any limitations) would apply to your specific circumstances. You also may wish to contact directly your home state’s 529 plan(s), or any other 529 college savings plan, to learn more about those plans’ features, benefits, and limitations. Keep in mind that state-based benefits should be one of many appropriately weighted factors to be considered when making an investment decision. Investment objectives, risks, charges, expenses, and other important information are included in a 529 college savings plan’s offering statement; read and consider it carefully before investing. Ascensus® and the Ascensus logo are registered trademarks of Ascensus, Inc. Ugift is a registered service mark of Ascensus Broker Dealer Services, Inc. Unite® is a registered service mark of Ascensus College Savings Recordkeeping Services, LLC. Copyright ©2016 Ascensus, Inc. All Rights Reserved. ACS-00848. (05/16)

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