Great job! You are moving forward to save for your child’s future college costs by starting a 529 account. CollegeAdvantage has tools to help you decide what saving strategy is the best fit for your family. After all, it is your plan, your way.
Ohio’s 529 Savings Plan offers four calculators with which you can construct your 529 plan*:
- College Savings Planner;
- Cost Of Waiting Tool;
- Tax Benefit Tool; and
- Risk Tolerance Questionnaire.
By working with these four tools, you can adjust the 529 account according to your college savings goals, time frame before college, and how comfortable you are with risk to determine the right asset allocation mix.
College Savings Planner
Use the College Savings Planner to receive personalized saving information; it can help you to estimate how much to put aside in a 529 account. After inputting your college savings goals and examining your total projected costs, you will receive an estimated monthly amount needed to meet your savings objective. Please note that this is an example for hypothetical purposes only. For further advice, consult with your legal, financial, tax, or other adviser.
To create a savings plan on College Savings Planner, enter your child’s name and age. From there, a line will automatically populate the annual cost for a public, in-state, and four-year college program. There is also the option to select a specific out-of-state university. The following box will ask for the amount you plan to contribute, whether it is monthly or yearly. Once the information has been entered, an estimated savings balance will be provided as well as what percentage the college costs may be covered by this savings plan.
So with that information, let’s apply it to an example:
Colleen is a one-year-old child who will enter a public, in-state, four-year eligible education institution in 17 years. The 529 account will be opened with an initial $2,000 contribution. Then, planned monthly contribution of $250 will be set, with a goal of covering half of the college costs. With a selected hypothetical rate of 6%, hit calculate to generate Collen’s report. The report includes the estimated total education cost, the amount which may be accrued, the dollar amount covered based on current savings and if there’s any additional steps needed to reach the saving goal.
You can use the College Savings Planner to create a plan that’s right for you and your family. And, once you’ve generated that the plan that works for you, you can generate, email and save a copy of your own plan.
Cost Of Waiting Tool
The earlier a college saving plan is started for a child, the longer the advantages of compound interest can grow in a 529 account. You should start saving as soon as possible to have the maximum impact of the 529 tax and interest benefits.
As with the College Savings Planner, you will need to input information into the Cost Of Waiting Tool including how many years your child has before starting college, and how many years it will take to complete the college education. There are certain defaults set for the annual college cost, education cost inflation rate and hypothetical annual rate of return; you may change any of these predetermined numbers. Then hit the calculate button. Your personalized results will appear on the screen, including charts showing the cost of waiting to save for college with a monthly payment, started by a lump sum investment, or by saving goal.
For the purposes of this calculator, college costs include tuition, fees, room and board, books and supplies, as supplied to the College Board and Wealth Management Systems Inc. (WMSI) from the institutions. The average costs are based on two and four year, public and private colleges nationally. There are different kinds of institutions in each region, and because of this, there may be a large variation in the actual costs for specific institutions.
Tax Benefit Tool
Perhaps you’ve already started setting aside funds for your child’s college education in another saving vehicle, such as a bank account. By using the Tax Benefit Tool on CollegeAdvantage.com, you can compare the benefits of saving in a tax-advantage CollegeAdvantage 529 savings plan to a taxable savings account.
With an Ohio 529 plan, there are benefits from tax-free earnings, tax-free withdrawals on qualified higher education expenses, and State of Ohio tax deduction available for residents of Ohio only.
As with the other calculators, you will need to fill in certain fields: the current savings balance, planned annual contributions, and how many years until college among other fields. Once the required information has been entered, a chart will appear to show potentially how much more additional funds may be in a 529 tax-free account when compared to a taxable account.
Please note that this is a hypothetical illustration; The Tax Benefit Tool doesn’t represent any particular investment and it doesn’t account for inflation. There may be other material differences between investment products that must be considered prior to investing. Again, you should consult with your legal, financial, tax, or other adviser.
Risk Tolerance Questionnaire
Lastly, CollegeAdvantage offers a tool to help calculate risk tolerance which can shape an investment strategy. The Risk Tolerance Questionnaire may help you to ascertain with which asset allocation strategy of stocks, bonds, and other short-term investments you will be most comfortable. Investors fall into three categories – conservative, moderate, and aggressive. After determining what risk-taking category is the best match, the tool can establish what asset allocation you may want to follow. For example, after taking the questionnaire, you find yourself in the aggressive category, the tool will suggest an asset allocation more heavily weighted in stocks. If you’re more conservative, you might be more comfortable with an asset allocation more tipped towards bonds. You can also review all the asset allocation of each type of investor for comparison. These allocations are suggestions only. Any investment in stocks, bonds, or short-term cash can lose money (excluding bank products).
CollegeAdvantage is your plan, your way. We have the tools for you to shape your 529 plan to best fit your family’s needs. If you are ready to start with Ohio’s 529 Savings Program, it’s easy to open an account here. CollegeAdvantage also has pointers on age-based strategies based on in which life/school stage your child is. If you already have an account and want to make some changes, log in to your account to update information or do other maintenance.
* Please note: With all the tools — College Savings Planner; Cost Of Waiting Tool; Tax Benefit Tool; and Risk Tolerance Questionnaire — the information supplied by them are for hypothetical illustrations only. The savings goals depicted by the College Savings Planner are an estimate based on certain assumptions with the information you have provided and cannot guarantee that sufficient amount of money will be saved or the future performance of any investment option. You should consult with your legal, financial, tax, or other adviser for their professional knowledge. The Tax Benefit Tool doesn’t represent any particular investment and it doesn’t account for inflation. There may be other material differences between investment products that must be considered prior to investing. CollegeAdvantage does not provide any investment, legal, or tax advice concerning individual decisions. You should always consult with your legal, financial, tax, or other adviser to carefully consider all of your options before investing.