We hear congratulations are due! What an exciting time for your growing family! As you’re waiting for your bundle of joy to arrive, there are steps you can take right now to secure their future, saving for their higher education costs in a 529 plan. Ohio’s 529 Plan, CollegeAdvantage, is here to help you reach your savings goal.
Open A 529 Account Before Their Birth
Did you know that you can open a 529 college savings plan for your child before they’re even born? It’s simple. Every 529 account has an account owner, usually a parent, and the beneficiary, usually the child. To be named as the beneficiary, your child must have a Social Security number. Until that time, you can open a 529 plan and designate yourself as the owner and beneficiary. This way, you can contribute to your child’s future college plans before they even arrive. Once you have your baby’s Social Security number, you can easily change the account to make them the beneficiary.
Baby Showers: Ask For The Gift Of College
There will be many showers to celebrate the impending arrival for your baby. And there are many items you will need for your child. However, why not ask for the gift of college at these festivities? Loved ones want to give presents that have significance and what gift can last longer than a college education or technical training? A 529 gift contribution lasts a lifetime.
Ohio’s 529 Plan has teamed up with Ugift to make receiving gift contributions simple. As the account owner of a CollegeAdvantage Direct 529 Plan, you can request a unique Ugift code, which allows the gift givers to donate online directly to your 529 plan without needing the account number. Gift givers use the Ugift code to contribute to the account at any time and as many times as they like.
If the gift giver would prefer to write a check, make sure it’s payable to Ohio Tuition Trust Authority (the state agency which administers CollegeAdvantage) and includes your child’s CollegeAdvantage Direct Plan 11-digit account number.
What if a loved one wants to jump-start your child’s college fund? Per federal 529 laws, an individual can give up to $17,000 or a married couple give $34,000 to each child annually without triggering a federal gift tax. Single filers can also make a one-time $85,000 contribution and married couples can give $170,000 per child to take advantage of five-year’s worth of tax-free gifts at one time. For more information, have them talk with their tax adviser or estate-planning attorney.
Ohio gift givers also receive a tax break. For Ohio residents, contributions to CollegeAdvantage can be deducted from their Ohio taxable income in any amount up to $4,000 per year, per beneficiary, with unlimited carry forward. Therefore, their gift of college savings not only helps your child but it can help them, too.
Necessary Nesting Needs For Your Newborn
Car seats. Cribs. Baby bouncers. Baby clothes. Bottles. Baby shampoo. Diapers. Oh so many diapers. And the list goes on and on. When you are starting to buy all the needed items for your baby, shop with Upromise, a free loyalty program that offers its members cash back for their purchases from a wide variety of businesses. Participating partners include online stores and restaurants from which Upromise members can earn cash back.
When you connect your debit and/or credit card to your Upromise account, you can start earning rewards with your everyday shopping. By linking your Upromise account to your CollegeAdvantage Direct 529 Plan account, you can roll over these rebates to build up your 529 plan.
Would you like to see how others used Upromise? Read this Saving Story from a CollegeAdvantage family who used it to add to their 529 savings.
Compound Interest
One of the reason to start a 529 college savings fund as early as possible for your child is to take full advantage of the power of compound interest. Compound interest is interest gained on contributions, earnings, and interest already accumulated in the 529 account. It’s one of the most dynamic tool to grow a 529 plan. The longer a college savings plan has time to develop, the longer compound interest can add the 529 account. Also, one of the tax benefit of investing in a 529 plan is tax-free earnings so every dollar of investment growth is yours to use, tax-free.
While compound interest in a 529 college saving plan is a huge advantage, compound interest with student loans is a huge disadvantage. This is why 529 plans are a great alternative to student loan debt, which currently stands at $1.76 trillion held by 45 million borrowers in America, as of September 2022. Saving now for your child’s post-secondary education or training is far cheaper than paying off student loans debt later in life.
The Cost Of Waiting To Save For College
Compound interest is essential for account growth; this is why we encourage you to start saving as soon as possible. However, it is never too late or too soon to start saving for your child’s future college cost. Ohio’s 529 Plan is here to help wherever you are on the saving path. CollegeAdvantage offer a Cost Of Delaying Saving Tool, which can show what a difference saving early can make to the account.
Target Enrollment 529 Investment Options
You can tailor a 529 college savings account to your family’s needs. Ohio’s 529 Plan offers a wealth of 529 investment options, from leading investment managers Vanguard, Dimensional Fund Advisors, and Fifth Third Bank. The investments include ready-made target enrollment portfolios and ready-made risk-based portfolios. These ready-made investment options are simple to use for each portfolio’s asset mix and allocations are pre-determined. When your child is younger, the asset allocation mix includes more stocks. As your child grows older, the asset allocation mix adjusts to reduce the amount of equity and increase the amount of conservative investing vehicles, such as fixed-income and cash preservation options.
Also, Ohio’s 529 Plan has savings strategies to determine how to modify your 529 college savings account based on your child’s age. If your child just started kindergarten, you have a long period of time to save as well as benefit from the power of compound interest. If your child is in middle or high school, you may want to increase your college savings contributions.
529 Plan Tax Benefits
So why use 529 plans to save for college? These accounts offer tax advantages other savings options don’t have, such as:
- Tax-free earnings. A regular savings account will have taxes assessed yearly but a 529 investment plan grows tax-free at the federal and state level.
- Tax-free withdrawals. Funds withdrawn from 529 plans are tax free when used for qualified higher education expenses — the necessary costs for enrollment or attendance at an eligible education institution like: tuition, mandatory fees, computer equipment to name a few.
- State income tax deduction for contributions to Ohio’s 529 Plan. Ohio residents can currently deduct 529 contributions up to $4,000 per beneficiary, per year from their state income tax. However, with unlimited carry forward, Ohio residents can continue to deduct a large 529 plan contribution from their state income tax until all of it has been deducted. For instance, if they contribute $12,000 to your beneficiary’s account, they can deduct $4,000 from their state income tax for the next three years.
Ohio’s 529 Plan Can Be Used Nationwide
And don’t worry; you don’t need to know where your baby will want to go to college when you’re using Ohio’s 529 College Savings Plan. CollegeAdvantage 529 account can be used at any two-year or technical college, four-year college or university, trade or vocational school, apprenticeships, or certificate program nationwide that accepts federal financial aid.
Ohio 529 Honors And Recognitions
If you read financial websites, you will discover the industry's high regard for Ohio’s 529 Plan. Financial organizations like Morningstar, Saving For College, CNBC, and Forbes have all rated Ohio’s 529 Plan as one of the best college savings programs in the nation. Here’s what they had to say.
Trusted financial industry investment research company Morningstar annually reviews the nation’s 529 college savings programs. Morningstar then ranks the 529 plans in a report released in November 2022.
Ohio’s 529 Plan is pleased to announce that the CollegeAdvantage Direct 529 Plan maintained its silver rating for the tenth year in a row. In addition, BlackRock CollegeAdvantage, Ohio’s Advisor 529 Plan retained its bronze ranking. This makes Ohio one of only three states that have both their Direct and Advisor 529 Plans ranked as medal-class college savings programs. The high ranking highlights the strength of and the industry’s regard for Ohio’s 529 Plan as one of the best in the nation.
Saving For College is an independent college-savings industry resource. Saving For College consistently recognizes Ohio’s Direct 529 Plan as one of the best plans in the nation for both Ohio residents and non-Ohio residents.
Ohio’s Direct 529 Plan is one of three plans in the nation to receive positive ratings from Morningstar in all four ranking pillars as well as earn the five-cap rating from Saving For College for residents and non-residents. Ohio’s Advisor BlackRock CollegeAdvantage 529 Plan is one of two plans to receive positive rankings in three Morningstar ranking pillars and earn five-cap rating from Saving For College for residents and four-and-a-half-star rating for non-residents.
A 5-Cap designation is dependent on criteria that shows the college savings plan “offers outstanding flexibility, attractive investment, and additional economic benefits (such as generous state tax incentives) that for some people, at least, will provide a substantial boost to their savings. There are few, if any, weaknesses noted in the program.”
Ohio’s Direct 529 Plan is one of ten 529 college savings plans nationwide to earn a 5-Cap rating for both residents and non-residents, as of March 31, 2022. Ohio’s Direct 529 Saving Plan has received this recognition multiple times for the plan’s attractiveness for Ohioans and across the nation.
Ohio’s 529 Plan was recently named one of Military Saves Savings Champion for our continual support of this important program. Military Saves is part of the nonprofit Consumer Federation of America and is an initiative of America Saves. Military Saves works with government agencies, defense credit unions, military banks, and nonprofit organizations to promote savings and debt reduction.
Forbes Advisor ranks Ohio’s 529 Plan as one of the six best college savings programs in the nation. According to their explanation: “Ohio’s 529 Plan comes with features in line with the other plans on our list, including low fees, a range of investment options and a tax deduction for Ohio taxpayers. … The plan also comes with a minimum contribution, both to open the account and for each contribution thereafter. But it is small ($25) and likely manageable for many plan participants.”
CNBC also selected Ohio’s 529 Plan as one of the five best programs nationwide. As they wrote, “There isn’t much not to like about the CollegeAdvantage 529 plan — there’s a good mix of investment options (including FDIC-insured accounts), low fees and plans from top companies like Dimensional Fund Advisors. In fact, overall management fees are some of the lowest we’ve seen. Combined with low expense ratios, this makes this plan one of our top picks.”
Money Inc. ranks Ohio’s 529 Plan, CollegeAdvantage, second in its list of the top ten 529 programs nationwide. They highlighted the “tax break for Ohio residents, a diverse selection of investment alternatives, and low fees.”
Visit Ohio’s 529 Plan online to start saving today for your child’s future education. An investment in a 529 plan is an investment in your child where every dollar saved today is a dollar that doesn’t have to be borrowed later. A 529 account can be used for whatever school comes after high school. Learn, plan, and start for as little as $25 with Ohio’s 529 Plan today at CollegeAdvantage.
This article was originally posted in April 2018 and has been updated to reflect new information for 2023.
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