Little girl with hand up in class

Giving the gift of education with a 529 plan

December 8, 2021

What better gift can you give a young person than a contribution to their future education? It’s a simple message – but a powerful one. It was also one of the core themes of last month’s 529 Conference, attended by Ext.’s CEO, Jillian Bannister and Ira Berg, Ext.’s Managing Director, U.S.   

The annual conference focuses on the ever-evolving 529 education savings plan market. The conference was a rich source of updates on recent U.S. federal legislative developments, along with insights and ideas on how to support the successful marketing of 529 and ABLE accounts (tax advantaged savings accounts for individuals with disabilities).  

The discourse was of great interest to the Ext. team due to the marketing strategy and campaign work we help asset managers and advisors undertake with their 529s in the United States and RESPs in Canada. We came away with the following key insights.

Lingering misconceptions: an opportunity to educate

There are many misconceptions about 529 plans that marketers need to address. Many forget that 529s are not just for college – they’ve been adjusted to accommodate apprenticeship expenses and, since 2019 SECURE Act, was passed they can even be used to pay down student loans. The Tax Cuts for Jobs Act (TCJA) also paved the way for 529s to cover grades K through 12 tuition (in eligible states). Given the volume of change in recent years, we often advise our clients to consolidate a list of myths and dispel them. It’s an opportunity for investment professionals to showcase the flexibility of this education savings vehicle and how it can help meet diverse financial goals.

What’s new: 529s will no longer impact financial aid

In the past, one of the major concerns about 529 plans was the impact they had on whether a student could qualify for federal financial aid. But planned revisions to the Free Application for Federal Student Aid (FAFSA) are about to change that. SavingForCollege.com reports that as of the 2024-25 school year, applicants will no longer be required to disclose cash support (which is currently counted as untaxed student income). This is great news for contributors and a key issue that can be included when educating investors. Grandparents and others can now feel confident knowing the additional support they’re providing won’t detract from a student’s need-based financial aid package. This is another great educational opportunity as clients may wish to revise their strategy based on this important development.

Expanding market: 529 plan and ABLE account assets continue to rise

The 529 and ABLE plan markets represent a huge opportunity for the industry in terms of tax, financial and estate planning. Stats shared at the conference, as part of its 3Q 2021 529 and ABLE Market Sizing Highlights report, confirmed the ever-growing amount of money being drawn out of these plans to help fund education. The report says: “Estimated 529 savings plan net outflows were $3.9 billion in 3Q 2021 compared to net outflows of $3.6 billion in 3Q 2020 and $3.9 billion in 3Q 2019.” It also points out that there is a missed opportunity when it comes to ABLE accounts. Only $937 million was invested in ABLE accounts in 3Q 2021, yet the Centers for Disease Control reports that 61 million adults in the U.S. live with a disability. Learn more about the value of ABLE accounts.

Growing your business: 529s can be just the beginning

It may not seem like much but offering to manage a 529 plan on behalf of a parent or grandparent can be a great first step towards providing them with more holistic wealth management, including estate planning. Helping a young couple save for their new baby can be an opportunity to grow relationships and achieve stickier assets.

With the holiday season upon us and the new year fast approaching, now is a perfect time to promote the advantages of both these plans. Plus, explaining their tax advantages may open the door to a wider discussion on investing and life goals.  

We can help you get an A+ on your 529 marketing

Looking for support in refining your 529 plan or RESP marketing? We have education savings strategies that can sustain your client conversations throughout the year. Contact us today at 1.844.243.1830 or info@ext-marketing.com.