Ohio 529 plan
CollegeAdvantage is Ohio's 529 college savings program. It features tax-free savings, low fees, and a wide range of investment options .The plan is managed by Putnam Investments, The Vanguard Group and Fifth Third Bank .The plan is offered and administered by the Ohio Tuition Trust Authority. This is a state agency. CollegeAdvantage has many benefits. This makes the plan easy and affordable.
The merits of the plan are:
- The earnings from the plan are tax free .
- $2,000 contributions can be deducted from Ohio income tax annually.
- The funds can be used at any college in the country .
- Payments can be for tuition, room and board, or books .
- Minimum contribute $15 at a time.
- Benefits arise from the professional money management by The Vanguard Group and Putnam Investments .
- No enrollment fee, no maintenance fee and low administrative fees .
- Funds can be transferred to another child.
- Funds can be withdrawn at any time.
- Investment options can be changed.
CollegeAdvantage 529 Savings Plan Ohio:
Previously the plan was offering only Putnam mutual funds in its age based and static portfolios .Now this 529 plan offers age based and static portfolios using vanguard index funds .The Putnam options are restricted to Ohio residents. The investor or the beneficiary must be a resident of Ohio at the time of enrollment to the Putnam investment program .But the Vanguard and fifth third options have no such restrictions .
Maximum contributions:
Accepts contributions until all Ohio 529 account balances for the same beneficiary reach $306,000 and the minimum contribution is $15 per investment option .
Investment options:
Both the Putnam Age Based Option and the Vanguard Age Based Option have three different risk levels .They are the Aggressive, Moderate, and Conservative Under the Putnam Age Based Option, shares are allocated between eight mutual funds founded on the selected risk level and the age of the beneficiary .A reallocation occurs every three months till the beneficiary reaches 21 years of age .Under the Vanguard Age Based Option, contributions are allotted to one of the five mutual fund portfolios corresponding to the selected risk level and age of the beneficiary .They are reassigned to more conservative portfolios as the beneficiary approaches college age.
Static investment options:
The Putnam investment options consist of three multi-fund portfolios (Aggressive Growth, Growth, and Balanced .It also contains a stable value investment, and 12 individual-fund portfolios The Vanguard investment options consist of four multi-fund portfolios and seven individual-fund portfolios .The Fifth Third Bank options consist of certificates of deposit and a savings account .
Balanced Options which is a mix of stocks and bonds :
Balanced options are committed in a preset combination of stocks and bonds that are changeless throughout the life of the account .
Individual investment options
Bank Options 100% cash
This is a safe alternative, bank options provide the security of a guaranteed rate of return. No fees are involved. FDIC backs the plan and premium interest rates are available.
Capital Preservation and Fixed Income Options
Capital preservation and fixed-income options are for those investors who seek to diversify their investment portfolio and reduce investment risk .
Equities which are 100% stocks:
CollegeAdvantage offers various choices of individual equity options .The
options range from various segments of the stock market These options are for
investors who are willing to take higher risk with the potential for higher
returns over the passage of time or for those who are looking to diversify
their portfolio .
State tax deduction or credit for contributions :
Contributions to any of Ohio State's 529 plans of up to $2,000 per beneficiary per year are deductible in computing taxable income, with an unlimited carry forward of excess contributions .The deduction is not limited to the parents of the beneficiary.Any person contributing to a beneficiary's account is eligible to take the deduction parents, grandparents, other relatives, even family friends .Each contributor who is an Ohio taxpayer can take the Ohio state tax deduction.
Pay no taxes as your funds grow and withdrawals used for any qualified higher education expenses are exempt from both federal and Ohio income tax.
Estate planning benefits
Parents or grandparents gifting to family members receives an immediate benefit in reducing the investors taxable estate Contributions up to $60,000 per child in case of individual and unto ($120,000 if married and filing jointly per beneficiary for a 5 year period are free from gift tax .
Pros and Cons of Putnam CollegeAdvantage Savings Plan:
Pros: State tax deduction for contributions by Ohio residents. Minimum contribution level is low and expenses are also low .The three age-based options, based on risk, are a positive practical option for many investors .
Cons: Total fees for most options are in the range of 1 .00% - 1.94%, which is a medium range for plans sold by advisors. Putnam is recovering from earlier issues with regulators and public confidence has being restored in the firm. Putnams contract with Ohio was renewed on October 1, 2005 for another five years until October 2010 .
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