A 529? What's That? A majority of retail investors are still unfamiliar with 529 plans

According to the results of Alliance Capital's fifth annual College Financial Preparedness Poll, the majority of investors still do not know about or sufficiently understand 529 plans. But with concerns over the effects of market volatility on college savings, those who do know want one which insures the principal.

In an effort to gauge how parents and grandparents are preparing for education expenses 1,028 residents over the age of 18 were polled by Harris Interactive. The survey also examined parent's awareness of 529 plans.

When asked how familiar with 529 plans they were only 23% responded that they were "somewhat" or "very" familiar with them. The vast majority, 77%, said they had little or no knowledge of the plans.

"There is considerable confusion in the marketplace," says John Carl, a senior vice president with Alliance.

The survey further revealed a change in investors' attitudes toward saving for college. When asked when they would start investing for their children's college expenses respondents to the 2001 poll stated that, on average, they would begin when the child was 11 years old. Due to the events of the past year that number has drastically fallen. Results of the 2002 survey now put that age at four.

There are "heightened concerns about the ability to adequately save," says Richard Davies, executive Vice President for Alliance Fund Distributors.

The survey found that the most desired feature of any 529 savings plan was an insured portfolio. Almost 75% of those polled desired a plan that would protect their principle investment from downturns in the market. The second most commonly desired feature, at 71%, was the ability to invest in 529 plans through payroll deductions.