Target Market Analysis: Trend in Age of Beneficiaries, 2018

By Paul Curley, CFA | | September 19, 2018

How has the average age of 529 beneficiaries changed over the last five years?

Source: Strategic Insight 529 Industry Analysis Report, 2013 and 2018

The data in the chart and analysis in the written section below comes from the “Strategic Insight 529 Industry Analysis 2018”, which is Strategic Insight’s 18th study on college savings. Its purpose is two-fold:

• To provide college savings industry participants with a qualitative and quantitative analysis of key trends that we believe will drive industry growth over the next five years

• To outline actionable steps to help product providers restructure their products, their marketing and their distribution to better align with the demands of investors, employers and advisers, and therefore to improve the growth rates of both their plans and the industry

The Strategic Insight 529 Industry Analysis 2018 builds on seventeen prior Strategic Insight college savings studies:

– 529 Distribution Analysis 2017
– 529 Plan Industry Analysis 2017
– 529 Plan Distribution 2016
– 529 Industry Analysis 2016
– 529 529 Distribution Study (2015)
– 529 Industry Analysis (2015)
– 529 Distribution Study (2014)
– 529 Industry Analysis (2014)
– 529 Advisor Study (2013)
– 529 Industry Analysis (2013)
– 529 Financial Advisor Support, Selection and Distribution Preferences (2012)
– 529 Industry Analysis (2012)
– 529 Plans and Distribution Analysis (2011)
– 529 Advisor Perspectives (2011)
– Evaluating the College Savings Market Opportunity (2009)
– 529 Strategies for Success (2004)
– 529 Plans: An Investment in Your Company’s Future (2002)

Proprietary Consumer Survey

The primary goal of this study is to analyze the decision-making and product-selection processes of individuals who are either 529 users, non-529 college savers or non-college savers. For Strategic Insight’s 2018 College Savings Consumer Survey, we partnered with a premier B2B and B2C panel provider and data collection services company to conduct a proprietary survey of over 1,000 consumers in February 2018. This nationally representative sample included U.S. household decision makers between the ages of 25 and 82, with annual incomes of $25,000 or more, who were parents or legal guardians of a child or children under the age of 18.

The survey utilized a choice model method that mapped the target market into three categories: 529 users, non-529 college savers and non-savers. This approach provides firms with strategies on how to convert non-college savers to college savers, college savers to 529 users and 529 users to 529 power users. Longitudinal analysis is reported for certain data points, as Strategic Insight conducted similar consumer surveys with enhancements based on feedback in 2012, 2013, 2014, 2015, 2016 and 2017, partnering with the same firm to poll consumers. While there were not any changes in the demographics of survey-takers in 2018, one change in the 2016 demographics was to include those with annual incomes of $25,000 or more, as opposed to $30,000 or more, to improve sample alignment with the U.S. Census. While this broadened out the target market of the survey takers, we do not project material changes in results due to the inclusion of the category. Therefore, year-over-year trend reporting will be included in charts and tables, and in the written analysis.

Other Surveys and Interviews

In addition to the consumer surveys described above, Strategic Insight regularly conducts proprietary industry surveys of product providers, advisors, broker-dealer home offices, plan sponsors and parents to give firms a 360-degree view of the current and projected state of the college savings plan industry. Strategic Insight also regularly conducts primary research in the form of interviews and meetings with industry executives in order to understand the latest trends in product development, marketing and distribution of college savings plans.

Analysis: How has the average age of 529 beneficiaries changed over the last five years?

The table above reports the percentage of 529 beneficiaries by age brackets. While the percentage of 529 users with younger beneficiaries is increasing, the percentage with older beneficiaries is decreasing. That means that the first wave of 529 users have successfully used their college savings for their intended purpose, and the industry is shifting toward successive generations of investors. Advisors, accountants and estate planners should note that long-term and short-term strategies are needed in college financial planning as the beneficiaries approach college age, and that younger parents are more receptive now to having the college financial planning discussion than even five years ago. Have the college financial planning discussion today.