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Ohio’s 529 Plan Remains First In Nation For Five-Year Performance

Long-term investment performance is a key growth factor in a 529 college savings plan. Savingforcollege.com, a trusted college-savings industry resource, provides research on 529 plans, financial aid, scholarships, and tools to estimate college expenses. Savingforcollege.com also analyzes the performance of the nation’s 529 plans on a quarterly basis and ranks them based on that performance. Ohio’s 529 Plan, CollegeAdvantage, consistently received high ranks for its long-term investment performance.

As of June 30, 2017, CollegeAdvantage Direct 529 Plan retained first place nationwide for the best performance in five-year category. The Direct 529 Plan ranked fourth overall in the nation in the three-year performance category. In the ten-year performance category, the Direct 529 Plan moved up one position to second overall.

The performance score is determined by comparing seven similar asset-allocation categories between all the nation’s 529 plans, the historical performance of each selected portfolio category, and then averaging the score of all the groupings.

Long-term investment performance is a crucial component in building a 529 account. Other key elements that contribute to a 529 plan’s growth are 529 tax advantages, regular contributions, and compounded interest.

529 plan tax advantages

CollegeAdvantage, Ohio’s 529 Savings Program, helps families across the nation save money for their children’s future college, trade, or technical school costs with tax-advantaged benefits. First, all contributions and earnings grow tax-free in a 529 plan. This means that all investment growth is yours to use to cover college costs. Second, a 529 withdrawal is tax free when used to pay qualified higher education expenses, those costs that are mandatory to attend the school. Third, a CollegeAdvantage account owner who is an Ohio resident can deduct their 529 contributions from their Ohio taxable income. Currently, the amount is up to $2,000 per year, per beneficiary, with unlimited carry forward. This means that $2,000 per year is not a contribution cap. If an Ohio taxpayer contributes $10,000 in one tax year, they will continue to subtract $2,000 per year, per beneficiary, from their state taxable income until all the 529 contributions have been deducted.

By the way, saving for college in Ohio’s 529 plan does not mean that those funds can only be used in Ohio. 529 plans can be used nationwide at any accredited two-year, four-year, graduate or professional, or any other post-secondary schools that accepts federal financial aid.

Automatic 529 account contributions

Study after study proves that automatic recurring contributions are one of the easiest ways to save for college. The funds are regularly invested in the 529 plan before there is a chance to spend it elsewhere. Automated 529 plan deposits can be aligned with paydays or a monthly contribution schedule. Just log in to your 529 account and select “Automatic Investments” from the Asset Management menu to schedule recurring contributions. Even small investments can add up to big savings over time through regular automatic contributions or payroll deduction.

529 plan growth through compound interest

It’s never too late or too early to start saving for your child’s future college costs. The earlier a 529 account is established, the longer it can build with compound interest. Compound interest is a saving powerhouse as it is the “interest computed on the sum of an original principal and accrued interest,” according to Merriam-Webster Dictionary. For 529 college savings plans, compound interest is based on contributions, earnings, and interest which accumulated in the account.

Compound interest in a 529 plan is a huge advantage; however, compound interest in student loans is a huge disadvantage. This is one of many reasons why 529 plans are a great alternative to student loan debt, which currently stands at $1.4 trillion held by 44 million borrowers in America. Saving now for post-secondary education or training is far cheaper than paying off student loans debt later in life.

Ohio’s 529Plan, CollegeAdvantage, is proud to receive these rankings from Savingforcollege.com. The CollegeAdvantage Direct Plan has a variety of investment options — from ready-made, age-based or ready-made, risk-based portfolios; individual investment vehicles to build your personalized portfolio, and FDIC-insured banking options. We’ve partnered with leading investment managers VanguardDimensional Fund Advisors, and Fifth Third Bank to provide these 529 plan investment options.

To help you build the 529 account that best fits your family’s college savings goals, Ohio’s 529 Plan offers calculators and tools. The college savings planner can assess the projected college costs and provide you an estimated monthly saving goal to be placed in a 529 plan. The cost of waiting tool can show approximately how much more money may be needed if you don’t start soon. The tax benefit tool shows the long-term advantages of tax-free growth in a 529 plan compared to a taxable savings account.

CollegeAdvantage also provides 529 account strategies that are shaped by your child’s life stage. When a child is a baby to toddler, it is a fantastic time to start saving for future college expenses to take advantage of compound interest. During kindergarten through elementary school, disappearing expenses like day care costs can be shifted to fund the 529 account so you’re still supporting your child’s education. When your child enters middle school and high school, you may need to step up your college savings. Even if your child is getting to start or has even started college, the tax-free earnings, tax-free withdrawals, and the state tax deduction for Ohioans can still build up the 529 account.

Open an Ohio 529 plan to save for your child’s future training and education. An investment in a 529 plan is an investment in your child. 529 accounts are an excellent alternative to student loan debt. CollegeAdvantage is your plan, your way.

*The performance data shown represents past performance, which is not a guarantee of future results.

Posted on September 12, 2017

Ohio Tuition Trust Authority

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