Catch-22 for 529 College Plans

Many parents are surprised to learn how much they need to save with a 529 -- even for a state college and even if they start at the child's birth.

For instance, Lisa Larson Adams, a San Diego mother of a five-month-old son, recently learned that to pay for four years at a California public college, or the equivalent of $50,000 in today's dollars, she would need to start now contributing $313 a month, or $3,756 a year, earning a 7% annual rate of return.

While assets in 529 plans are growing apace, a report issued last year by Cerulli Associates of Boston says that in 2002 only 4.3% of children under 18 had an account, with an average balance of $6,457.

Interest in 529 plans is high, but many families are intimidated by the tax complexities and the mind-boggling array of plan choices. For more information, visit collegesavings.org, operated by an association of state treasurers, and savingforcollege.com, run by CPA Joseph Hurley, a 529 specialist and advocate who rates the many state plans.

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