Ohio 529 Plan Continues 5-Cap Rating
If you are ready to start saving for your children’s future higher education and want to learn more about tax-advantaged 529 plans, Saving For College is an unbiased industry-trusted informational website, which provides detailed analysis and articles on 529 plans, financial aid, and scholarships, as well as tools to estimate college expenses.
Savingforcollege.com also ranks the nation’s 529 programs based on how well they serve both in-state and out-of-state residents with its 5-Cap Rating rankings. Ohio’s Direct 529 Plan, CollegeAdvantage, has earned the top 5-Cap Rating for both in-state and out-of-state residents as of March 31, 2021. This makes Ohio’s 529 Plan one of only six Direct 529 plan nationwide to achieve this honor for both in-state and out-of-state residents.
Ohio’s Direct 529 College Savings Plan has received this top 5-Cap rating for over 5 years running.
In order to achieve the top 5-Cap Rating, a 529 plan must “offer outstanding flexibility, attractive investments, and additional economic benefits (such as generous state tax incentives) that for some people, at least, will provide a substantial boost to their savings. There are few, if any, weaknesses noted in the program.”
The rating is based on five criteria:
- The performance of the 529 plan;
- The costs of running the college-savings plan including expense ratios, administration and managerial fees;
- Features such as a spectrum of age-based and risk-based portfolios as well as FDIC-insured options to cover all levels of investment risk, participation in programs like Upromise and Ugift, and contribution restrictions;
- Reliability signals such as plan disclosure statements, the ease of making account changes, and the caliber of outside program managers,
- Resident upgrades such as advantages like tax benefits for any account owner as well as additional tax breaks for state residents.
BlackRock CollegeAdvantage 529, Ohio’s 529 Advisor Plan, was also one of the top-rated advisor plan with a 5-Cap rating for in-state residents and 4.5-Cap rating for out-of-state residents, one of only six advisor plans among the highest rankings for 529 plans from Saving For College.
Other honors from Saving For College
Ohio’s 529 Plan also tops two of the long-term performance rankings from Savingforcollege.com, which analyzes the performance of the nation’s 529 plans on a quarterly basis and ranks them. Ohio’s 529 Plan has consistently received high marks for its long-term investment performance.
Nationwide, 49 states and the District of Columbia offer 529 plans. As of March 31, 2021, CollegeAdvantage Direct 529 Plan ranks first in the nation for the best investment performance in the ten-year category. Ohio’s Direct Plan also ranks second in the nation in the three-year category, sixth in the nation in the five-year category.
Saving For College determines a 529 plan’s performance score 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.
Also, Saving For College ranks Ohio’s Direct 529 Plan as the second best college savings plan for performance in the nation. This was determined by calculating a “performance score,” by analyzing the reported investment performance of a subset of portfolios from each state’s 529 savings plan programs. The plans are then ranked according to their score.
More recognition for Ohio’s 529 Plan
Additionally, Ohio’s 529 Plan has been named one of Military Saves’ Savings Champion for our continual support of this important program. Military Saves is part of the nonprofit Consumer Federation of America and is an initiative of America Saves. The program is a participant in the Department of Defense’s Financial Readiness Network. Military Saves also works with government agencies, defense credit unions, military banks, and nonprofit organizations to promote savings and debt reduction. Ohio’
Morningstar ranks Ohio’s Direct 529 Plan as a Silver. In addition, BlackRock CollegeAdvantage 529 has a bronze ranking. This makes Ohio one of only four state programs that have both their Direct and Advisor 529 Plans ranked as medal-class college savings programs by Morningstar. The high ranking for both Ohio’s CollegeAdvantage 529 Plans highlights the strength of these two college savings plans as well as the industry’s regard for Ohio’s 529 Plan as one of the best in the nation.
Forbes Advisor ranks Ohio’s 529 Plan as one of the six best college savings programs in the nation for 2021. According to the “Why we picked it” explanation: “Ohio’s 529 Plan comes with features in line with the other plans on our list, including low fees, a range of investment options and a tax deduction for Ohio taxpayers. … The plan also comes with a minimum contribution, both to open the account and for each contribution thereafter. But it is small ($25) and likely manageable for many plan participants.”
Also in 2021, CNBC selected Ohio’s 529 Plan, CollegeAdvantage, as one of the five best programs nationwide. As they wrote, “There isn’t much not to like about the CollegeAdvantage 529 plan — there’s a good mix of investment options (including FDIC-insured accounts), low fees and plans from top companies like Dimensional Fund Advisors. In fact, overall management fees are some of the lowest we’ve seen. Combined with low expense ratios, this makes this plan one of our top picks.”
Ohio’s 529 Plan tax advantages
What are some of the reasons that Ohio’s 529 Plan ranks so well? CollegeAdvantage helps families across the nation save money for their children’s future costs associated with college, vocational, trade, or technical school, as well as apprenticeships, while offering tax-advantaged benefits.
First, contributions and earnings grow tax free in a 529 plan, so all investment growth will be yours to use to cover future 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 federally accredited school or program. Third, a CollegeAdvantage account owner who is an Ohio resident can deduct their 529 contributions from their Ohio taxable income. The deduction is now $4,000 per year, per beneficiary, with unlimited carry forward. This means that $4,000 per year is not a contribution cap. If an Ohio taxpayer contributes $12,000 in one tax year, they will continue to subtract $4,000 per year, per beneficiary, from their State of Ohio taxable income until all the 529 contributions have been deducted.
Not Just For Four-Year Programs
529 plans can be used for whatever comes after high school, as higher education takes many forms. This list includes not just four-year universities and colleges, but also community colleges, trade and specialty schools, certificate programs, graduate school, law school, medical school and apprenticeships.
Simply put, you can use the funds in your Ohio 529 Plan almost anywhere you are comfortable sending your child and your money. 529 plans can be used at any post-secondary school that accepts federal financial aid. If you want to confirm that the schools your child wants to attend — whether four-year, two-year, graduate, or vocational — accepts federal aid, then do a search to see if the institutions have a Federal School Code on the Free Application for Federal Student Aid (FAFSA). If the schools do, then you can use your 529 funds there.
In 2019, new qualified higher education expenses have been added to 529 college savings plans.
First, qualified costs for apprenticeships — such as fees, textbooks, supplies, and equipment like required trade tools — now can be paid with 529 distributions. The apprenticeship program must be registered with the Secretary of Labor’s National Apprenticeships Act in order to use a 529 plan withdrawal. Interested parties can check the U.S. Labor Department’s search tool to confirm that a program is eligible.
Second, student loan repayments are now a qualified cost for 529 plans. Any student loan that qualifies for the federal student loan income tax deduction can now be paid with a 529 distribution. There is a $10,000 lifetime limit per 529 beneficiary. However, an additional $10,000 can be used to repay qualified student loans for each of the beneficiary’s siblings.
Tools and calculators
Ohio’s 529 Plan has calculators and tools to shape the 529 plan to best fit your family’s needs. Would you like to receive an estimate on your child’s projected college costs and what monthly 529 plan contribution can help you reach a saving goal? Then use the college savings planner. The cost of waiting tool can approximate how much more money will need to be saved if you get a late start on saving for higher education costs. The tax benefit tool shows the long-term advantages of tax-free growth in a 529 plan compared to a taxable savings account. Answer the risk tolerance questionnaire to determine an investment strategy best suited to your comfort level with risk.
Visit Ohio’s 529 Plan to start saving today for your child’s future education. An investment in a 529 plan is an investment in your child where every dollar saved today is a dollar that doesn’t have to be borrowed later. A 529 account can be used for whatever comes after high school. Learn, plan and start an Ohio 529 Plan today at CollegeAdvantage.com.
Posted on July 06, 2021