Target Market Analysis: Income of 529 Users, Non-529 College Savers & Non-Savers

The “529 Industry Analysis 2017” is Strategic Insight’s 16th 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 advisors, and therefore to improve the growth rates of both their plans and the industry

Research Sources

This report builds on fifteen prior Strategic Insight college savings studies:
• 529 Plan Distribution: 2016
• 529 Industry Analysis 2016
• 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)

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 2017 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 1,005 consumers in February 2017. 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 and 2016, partnering with the same firm to poll consumers. While there were not any changes in the demographics of survey-takers in 2017, 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.

What percentage of 529 users, non-529 college savers and non-savers earn certain levels of income?

The exhibit from the Strategic Insight 529 Industry Analysis 2017 reports the total household annual income before taxes for non-savers, non-529 savers and 529 users. Each income category above $100,000 per year reported a higher percentage of 529 users than non-529 savers and non-savers. Alternatively, 529s were found to be not only for the wealthy, as 18.0% of 529 users earned between $25,000 and $50,000 per year and 35.5% of 529 users earned between $25,000 and $75,000. Inversely, 21.1% of non-savers earned over $100,000 per year and 7.6% of non-savers earned over $150,000 per year. Therefore advisors have an opportunity to help families of all income levels in the college financial planning process.