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It’s the end of January; how are you doing on your New Year’s resolutions? If everything is going to according to plan, you should be taking steps to achieve your goals. If you’re feeling a little bit behind on your fiscally fit objectives, CollegeAdvantage has some pointers to help you reach your college-saving goals.
If you haven’t already, first open a CollegeAdvantage Direct 529 plan. An account with Ohio’s 529 Savings Program is simple to open; review our website to learn more about 529s. CollegeAdvantage offers calculators and tools to help set your savings goals. If you’re curious about what you should aim to save for your child’s future college costs or if you want to determine your risk tolerance, use these tools to gain better insight. Remember, time is your best friend when saving money because of the power of compound interest. Every amount contributed, whether big or small, can help you reach your savings goal.
Would you like more reasons why you should start a 529 plan? There are many tax advantages for saving for college in a 529 account.
All contributions to a CollegeAdvantage 529 plan will grow tax-free and withdrawals will be tax-free, as long as the funds are used to pay 529 qualified higher education expenses. To see how tax-free growth adds up with a 529 savings plan, CollegeAdvantage has a tax benefit tool that you can use to compare a 529 college-savings account and a taxable savings account. Unlike a taxable account, a CollegeAdvantage 529 plan ensures that every bit of investment growth is yours to use, tax-free.
Another tax benefit of a CollegeAdvantage Direct 529 plan is the State of Ohio tax deduction. If you are an Ohio taxpayer, contributions to CollegeAdvantage may be subtracted from your Ohio taxable income in any amount up to $4,000 per year, per beneficiary, with unlimited carry forward. This means that $4,000 per year is not a contribution cap. If you contribute more than $4,000 in a calendar year, any amount above $4,000 may be deducted in future years, in increments up to $4,000 per year, until all contributions have been deducted. Non-account owners who are Ohio taxpayers also qualify for this tax benefit when they give monetary contributions directly to CollegeAdvantage accounts.
If you’ve already opened a CollegeAdvantage 529 plan, consider following some of these steps to ensure you are on target with your college-saving goals.
- Review your 529 account. Are you putting enough funds aside to cover what you’d like of your child’s college costs? If you want to check the numbers, use College Savings Planner to receive personalized saving information. You can vary your college-savings goals in this tool to learn the projected costs for each goal as well as receive an estimated monthly amount needed to meet that savings objective. Please note that these examples are for illustrative purposes only. For additional advice, consult with your legal, financial, tax, or other advisor. If you’ve determined that what saving goal is the right for your family, you can change the current contribution amount to the new number.
- See if you need to change your savings strategy. As you child reaches a new life stage, you may want to update your plan of action to reach your college savings goals.
- Check your account balance and track the investment performances. If you would like to make a substitution to your 529 savings portfolio, you can make an exchange of an asset from one investment option to another investment option, twice in a calendar year for the same beneficiary.
- Simplify your savings by setting up automatic deposits into your Ohio 529 College Savings Account. Many account owners have said that it’s best to have money automatically transferred from their checking or savings account to the 529 before unintentionally using those funds for other expenses. You can set up contributions to be transferred electronically to match your paycheck deposits or create your own monthly contribution schedule. Some employers offer payroll deduction, where a portion of your pay could be deposited directly into a 529 account.
- Convert your disappearing expenses into regular 529 contributions. Disappearing expenses are those costs in your family’s budget for only a limited time span. For example, preschool and day care are large disappearing expenses once a child starts kindergarten. Once those services are no longer needed, deposit those funds into your 529 plan. You won’t miss the money while you continue to support your child’s educational needs.
- Add your federal tax returns, pay raises, or bonuses to the 529 account. The average tax return is $2,466. Adding $2,500 a year to a 529 plan could cover as much as 40% of college at an Ohio public university, based on 18 years at 6% growth.
- Invite other family members and friends to make contributions to your child’s 529 plan with Ugift rather than giving toys or clothes. You can assure them that giving the gift of college is much more meaningful and beneficial for your child’s long–term success.
- Shop with Upromise. Upromise is a free loyalty program that offers its members cash back for their purchases from a wide variety of businesses. When you connect your debit and/or credit card to your Upromise account, you can start earning rewards with your everyday shopping. Then link your Upromise account to your CollegeAdvantage Direct 529 Plan account to roll over these rebates.
CollegeAdvantage is your plan, your way. Remember, every amount contributed to a 529 will grow tax-free and can be withdrawn tax-free. So keep moving forward to reach your college-savings goal. If you are ready to start with Ohio’s 529 Savings Program, it’s easy to open an account here. If you already have an account and want to make some changes, log in to your account to update information or do other account maintenance.
Posted on January 25, 2017