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This story from our Executive Director, Tim Gorrell, originally ran March 27, 2017, on College Savings Plans Network (CSPN) website, collegesavings.org. As their website states, “the College Savings Plans Network (CSPN) was formed as an affiliate to the National Association of State Treasurers (NAST). Established to make higher education more attainable, the network serves as a clearinghouse for information among state-administered college savings programs. Additionally, CSPN monitors federal activities and promotes legislation that will positively affect Section 529 plans.”
April Is Financial Literacy Month
April has been designated Financial Literacy Month to focus on increasing the public’s comprehension of basic monetary concepts. Many banking institutions and credit union offer financial wellness seminars. Additionally, university extension offices may provide financial literacy classes. By doing a little research, people can find many free resources available to improve their understanding of how to best use, as well as save, their money.
For the 529 college savings industry, progress has been made in educating the public about the abundant advantages of these college savings plans and it must continue.
While student loan debt nationally has risen to $1.48 trillion, there has also been a marked increase over the past ten years in saving for college, which indicates a measure of thoughtful financial literacy. According to the Salle Mae report, “How America Saves For College 2017,” parents covered 31% of college costs. The report also found that families who use 529 college savings plans have saved more than other college savers. A takeaway from the report is people are learning about the added tax benefits and values of 529 college savings plans and are using them.
Adults Can Use 529 Plans For Their Own Education
There is still more for the public to understand about 529 plans, including one that many people don’t recognize – that 529 accounts aren’t just for children. If an adult would like to head back to college to finish their degree, hone their professional skills, or start a new career path, then they should consider opening a 529 college savings account for their own college expenses and tax benefits.
Traditionally, 529s have been used to fund children’s future college costs; however, there are no age restrictions on who can use these college savings accounts and no time limits on when the account must be used. Furthermore, 529 plans were created to be used at any federally accredited educational institution, which includes two-year, four-year, graduate, professional or post-secondary degree programs. For working adults who want to continue their college education to advance their career, they should check with their human resource department to see if tuition reimbursement is a part of the employee benefits. This benefit combined with 529 savings could significantly reduce higher education costs.
All the tax advantages associated with a child’s 529 account would also apply to an adult’s account. The 529 college savings plan will grow with tax-free earnings on contributions. Withdrawals from 529 plans are also tax free, provided the funds are used for qualified higher education expenses, which includes many large costs like tuition, mandatory fees, and computers. With Ohio's 529 Plan, CollegeAdvantage, Ohio residents can deduct up to $4,000 from their state taxable income based on contributions made to 529 plans per beneficiary, per year. However, the $4,000 is not a contribution cap. With unlimited carry forward, the Ohio taxpayer can continue to subtract to subtract $4,000 per year, per beneficiary, from their Ohio taxable income until all the 529 contributions have been deducted.
An additional benefit to 529 plans: If there is money left over in a child’s plan, the account owner can transfer the remaining funds to the another child's or their own 529 account. No tax penalties will be accessed with the transfer as long as the new beneficiary is a family member. By rolling over these 529 plan assets, the account owner can use the money already set aside for college expenses for their own continuing education.
People want to understand their finances and make informed fiscal decisions. As they learn more about the multiple benefits of 529 accounts, the use of these college savings plans will continue to grow.
Consider opening an account with Ohio's 529 Plan to save for future higher education costs. Remember, 529 accounts are an excellent alternative to student loan debt. Go online learn more about College Advantage. The Ohio’s college saving program offers calculators and tools to estimate college savings goals, approximate the cost of waiting, determine risk tolerance, and compare the benefits of placing college savings in a tax-advantaged account. Additionally, CollegeAdvantage provides guidance on 529 account strategies by life stage. Partnered with leading investment managers Vanguard, Dimensional Fund Advisors, and Fifth Third Bank, CollegeAdvantage Direct 529 Plan offers a variety of investment options to build a 529 plan that best fits the account owner’s needs. As always, CollegeAdvantage is your plan, your way.
Posted on April 2, 2018