Starting to save for your children’s education and career training after high school can seem like an impossible feat. However, Ohio’s 529 Plan, CollegeAdvantage, has the tools and guidance to break down your savings goal into more manageable steps to accomplish it. Ohio’s 529 Plan has three tools that can help you shape the college savings account that best suits your family’s future education needs.
But first, here are a few reasons why it’s best to save in Ohio’s 529 Plan: the growth power of three tax benefits.
- Earnings in a 529 plan grow tax-free, so all investment growth will be yours to spend on your children’s future qualified expenses. Compound interest — the interest earned on contributions, earnings, and interest already accumulated in the 529 account — is included in the tax-free earnings.
- 529 plan withdrawals to pay for qualified higher education expenses are tax-free at accredited colleges and universities; trade, vocational, and tech schools; and certificate programs that accept federal financial aid. Registered apprenticeships costs — fees, textbooks, supplies, and equipment, including required trade tools — can also be paid with a 529 plan withdrawal.
- Ohio residents who contribute to Ohio’s 529 Plan, can deduct up to $4,000 per year, per beneficiary, off their state income taxes with unlimited carry forward. So, if you contribute more than $4,000 in one year, you can continue to subtract $4,000 per year, per beneficiary, from your State of Ohio taxable income until all the 529 contributions are deducted.
So, whether you are starting on your college saving journey or have been walking down the higher education path for a while, you should crunch numbers at different points to answer important questions. You may be asking yourself, “What dollar amount to contribute each pay period in a 529 plan?” or “How more much college savings can be accumulated by increasing my current contribution?” You may be wondering, “How does saving in a tax-free 529 plan affect the 529’s bottom line when compared to a standard savings account?” and “What would happen if I waited a little longer to open a 529 plan?”
Ohio’s 529 Plan has tools that can help. Our College Savings Estimator can help you determine what dollar amount you would like to set aside to reach your college savings goal. The Cost of Delaying Tool can show how starting early with your higher education savings can really build up over time, even with a small contribution to start. The Tax Benefit Calculator illustrates how the tax-free earnings in a 529 plan allows you to keep every dollar that grows in the account, unlike a taxable bank savings account.
College Savings Estimator
If you aren’t sure where to start, the College Savings Estimator is a good place to figure out your next steps.
With this tool, you can customize your 529 plan. First, answer some basic questions like what state you live in, what grade your student is in, how much you have already saved, and how much you would like to contribute monthly. Next, you’ll be asked to select what college your child would like to attend. You can be as specific as you by typing in a school name, or you can select the average cost of attending in Ohio public in-state four-year program, an Ohio community college, national public four-year college, national private four-year college, and national private non-profit four-year college. This will generate an estimate of the future college cost. The next screen will allow you to slide over a percentage for which you would like to save for their future education. After answering these questions, the College Savings Estimator will generate a personalized report for you based on your future college savings goals. You can continue to work on this report by changing how the savings goal percentage is; whether you want to save for books, room and board, and personal expenses; your monthly contributions; and more.
Once you have a plan that feels doable for your family, save it with your child’s name and print it for your review. You can download the report and review it annually to see if you’d like to make any changes.
If you have more than one child, you can add to child to this report and start the same process again in the College Savings Estimator to generate another personalized report for that child.
Cost of Delaying Savings Calculator
It’s understandable that you may want to save only when your family’s finances seem steady. However, even small contributions can grow into a large 529 account when you start saving early in your child’s life. The Cost of Delaying Savings Calculator can determine approximately how much more you will need to save for every year you delay saving for college.
Once in the calculator, you will need to select your home state, how many years before your child will go to college, how much you currently have saved, what school your child would like to attend, and your savings goal. After adding this information into the tool, it will create charts to show how much extra in monthly contributions you’ll need to catch up. You can download your personalized report to review it.
As you know, saving early in a 529 plan is a wise idea to benefit from the power of compound interest. This is interest accrued not only on your original 529 contribution but every contribution afterwards as well as the earnings from the 529 investment options and the already accumulated interest.
Tax Benefit Calculator
If you’ve already been saving for your child’s higher education in a savings account at a bank or credit union, congratulations! You’ve made great strides in securing their future. However, you may have also discovered that you are taxed on all earnings or interest earned in that account.
With a 529 plan, all earnings are tax free at the federal and state level, so every dollar earned is yours to use for college costs. With the Tax Benefit Calculator, enter the requested information to receive a personalized chart with hypothetical illustrations of how much more money you will have in a tax-free 529 plan when compared to a taxable bank savings account.
Since 1989, Ohio’s 529 Plan has been helping families across the nation save for their children’s higher education with many tax benefits. Ohio’s 529 Plan covers qualified expenses at any four-year college or university, two-year community college, trade or vocational school, apprenticeship approved by the U.S. Labor Department, or certificate programs, or continuing education classes nationwide that accepts federal financial aid. Learn, plan, and start for as little as $25 today at CollegeAdvantage.
