Who’s Saving for College in 529 Plans?

Since President Obama proposed rolling back the federal tax advantages of 529 plans—a position he’s since changed—the accounts have been characterized as both a reward for middle-class Americans trying to do the right thing and a tax break for the wealthy. So who actually benefits? In general terms, families using education-savings accounts have higher incomes than most Americans. That’s the pattern if you look at account holders. And it’s more stark if you look at account balances. Let’s take a look:

What share of families use the accounts?

Based on the attention 529 plans got after the president released his tax proposal, you might expect a reasonably large figure. But only a small portion of families use the accounts.

How much income do account holders have?

In order to save money, you have to have money. While some families with incomes below $50,000 hold accounts, the bulk of account holders make more.

How much money is in these accounts?

The average balance of a 529 account is $19,774, according to Strategic Insight’s data. That would almost cover one semester’s tuition at American University this year. But the amount of money people have in the accounts varies substantially by their income.