DISB Reminds Investors to Do Their Homework Before Investing in 529 College Savings Plans

(Washington, DC) As the year draws to a close, many investors are making decisions for their long-term financial goals, including saving for college through Section 529 College Savings plans. With increasing numbers of investors turning to these plans to help finance higher education costs, the Government of the District of Columbia Department of Insurance, Securities and Banking (DISB) is concerned that they may not always have all the facts needed to make appropriate investment decisions.

"It pays to do your homework before investing in a College Savings Plan to educate yourself about the differences among the many plans offered today and choose the plan that's right for you," said DISB Acting Commissioner Thomas E. Hampton.

College Savings Plan assets and choices are growing at a fast pace, Hampton said, adding that the most recent statistics from the College Savings Plan Network, an affiliate of the National Association of State Treasurers, show that state-sponsored 529 College Savings Plans have attracted more than $72.4 billion in assets.

These tax-advantaged savings plans are designed to encourage saving for future higher education costs by allowing contributions to grow tax free. The money investors take out later from the plans is free from federal taxes as long as it is used to pay for qualified higher education expenses. Hampton noted that the tax-free withdrawal provisions are scheduled to lapse in 2010 unless renewed by Congress.

Every state and the District of Columbia offer at least one 529 College Savings Plan. Although these plans can be purchased directly from the plan administrator, industry estimates show that as many as three out of four investors purchase their plan with the help of an investment professional, such as a financial adviser or broker.

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