Back To Blog
Little ones grow up in a blink of an eye. One day, they’re graduating from preschool and the next, high school. No matter where a child is in their schooling, it’s never too late to save and invest in a 529 plan for their future training and education costs. Every dollar saved is a dollar that doesn’t have to be borrowed which makes a 529 college savings plan an excellent alternative to student loan debt. No matter when an account is started, Ohio’s 529 savings plan, CollegeAdvantage, is there with information, tools, and calculators to help parents develop their post-secondary savings strategy.
Even if a student is nearing the end of high school, there are a variety of reasons to open a 529 plan to fund their post-secondary education.
529 plan tax benefits
With a 529 plan, investment earnings grow tax free, unlike other savings accounts which can be taxed each year. Account withdrawals are also tax free, as long as they are used for 529-qualified higher education expenses, which include major costs like tuition, room and board, and computers to name a few. Effective Jan. 1, 2018, contributions to Ohio’s 529 Plan made by Ohio residents can be deducted up to $4,000 per beneficiary, per year, with unlimited carry forward, from their State Of Ohio taxable income. Even if college is only few years away, or even a few months away, the many tax advantages can still boost the value of your 529 college savings.
Different 529 investment strategies for different ages
Based on a child’s age, different 529 investment plan strategies can be considered. For instance, if the child has some time before heading off to college, trade or technical school, then a 529 plan could include a more aggressive asset allocation to potentially gain higher returns with the increased risk. If the child will need the 529 account funds for college costs soon, then a more conservative asset allocation can be adopted so the accrued funds aren’t susceptible to the volatility of the stock market. In addition, CollegeAdvantage offers ready-made, age-based portfolios as well as ready-made, risk-based portfolios to tailor a 529 college savings plan to the individual needs of the account beneficiary as they grow up.
Additionally, if their child has entered middle or high school, the account owner may want to accelerate their college savings by increasing their 529 contributions. Is the child already in college? Then the account owner should consider continuing to save in a 529 plan to take advantage of tax-free earnings (which saves even more money), tax-free withdrawals, and maximize the Ohio income tax deduction.
Tools and calculators
Ohio’s 529 Plan offers calculators and tools to build a 529 plan that best fits the account owner’s needs. The college savings planner can assess the projected college costs and provide an estimated monthly saving amount to be placed in a 529 plan to reach a saving goal. The tax benefit tool illustrates the advantages of tax-free growth in a 529 plan compared to a taxable savings account.
Others can give the gift of college
Loved ones want to give meaningful gifts, especially for the big events in a child’s life – holidays, birthdays, and graduation (whether it’s preschool, middle school or high school!). Encourage them to give the gift of college by making a contribution to a child’s 529 plan. Especially as college draws near, these gifts will take on added significance.
Ohio’s 529 Plan has partnered with Ugift to simplify the process of allowing other people to contribute to CollegeAdvantage Direct 529 Plan. Ugift creates a code which will authorize gift givers to donate directly to a 529 plan online without needing the actual 529 account number. Once a gift giver has the code, they can continue to make one-time or recurring electronic gifts for college without fees. Plus, if the gift giver is an Ohio taxpayer, they can also deduct up to $4,000 in contributions per beneficiary, per year, from their state taxable income. Their gift contribution must be made payable directly to the account, not to the child.
Another option to consider? Have a heart-to-heart conversation with the child’s grandparents. Many 529 plan gift givers are grandparents who place a high value on higher education. They may wish to make a contribution to an existing 529 plan or even establish their own account for their grandchild. As the account owner, the grandparents will oversee the account and determine when to make withdrawals to pay for the child’s higher education expenses. They also control transfers between accounts, which is especially flexible if there is a need to transfer surplus funds from one grandchild to another. Or they can transfer their 529 account funds into an account that the parent already established as college approaches.
Benefit From Gift Tax Rules
Family and friends can add to 529 accounts while taking advantage of the federal gift tax benefits. Per federal 529 laws, individuals can invest up to $15,000 ($30,000 for married couples) per beneficiary without incurring any federal gift-tax consequences. Additionally, an individual can even contribute up to $75,000 per beneficiary in a single year ($150,000 for married couples) and take advantage of five years’ worth of tax-free gifts at one time. For grandparents who are considering gift tax implications while evaluating their estate planning, 529 plans can be smart way to insure that their monetary gift is used for a highly valuable asset — a college education with little student loan debt. For further information about the federal gift tax, please consult a tax adviser or estate-planning attorney.
Shop With Upromise To Bolster 529 Account
Ohio’s 529 Savings Program has partnered with Upromise to help account owners save even more for college. Upromise is a free loyalty program that offers its members cash back for their purchases from a wide variety of businesses partners, which include over 850 online retail stores and 10,000 restaurants where Upromise members can earn 5% cash back. Others organizations include over 20,000 grocery and drug stores, where Upromise members earn money back on purchases and earn additional rebates with eCoupons. By connecting debit and/or credit card to an Upromise account, account owners can start earning rewards with everyday shopping. When the account owners link their Upromise account to their CollegeAdvantage Direct 529 Plan, they can roll these rebates straight to the account.
Curious how CollegeAdvantage Direct 529 Plan account owners used Upromise? Read this Saving Story from a family who used it to add to their 529 savings.
Although the benefits of a 529 college savings plan are maximized when the account has a long period of time to grow through the power of compound interest, it’s never too late to start saving for college in Ohio’s 529 Plan. The many benefits, increased contributions, investment strategies, loved one’s college savings gifts, and Upromise can build your 529 account to pay for the child’s post high school education or training costs.
Ready to start with Ohio’s 529 Savings Program? It’s easy to open an account online. Already have an account and would like to make modifications? Log in to the Direct 529 Plan account to increase automatic deposits or payroll deduction contribution amount, update information, or perform account maintenance. And remember, 529 college savings plan is an excellent alternative to student loan debt. CollegeAdvantage is your plan, your way.
Posted on June 12, 2017