When my wife and I had our first child, we decided to get a jump on planning for college expenses. After researching college savings plans and comparing available plans, I decided to open a 529 College Savings Plan in the state of Ohio – the College Advantage 529 Plan. There are several reasons I chose this plan and I thought I would share them with you today.
Why Choose the CollegeAdvantage 529 Plan?
If you plan on saving for college, then consider a tax advantaged college savings account. In addition to the 529 Plan, there is the Coverdell Educational Savings Account (ESA), which is another tax advantaged college savings plan. The 529 plan is more flexible and offers better tax benefits than the ESA, and was a better fit for my needs. You can compare 529 plans and Coverdell ESAs for more information about which type of plan is better for you.
Once we decided to go with a 529 plan, we researched the options available to us, and the College Advantage 529 Plan kept floating to the top of our list.
- Top rated 529 plan. Morningstar rated the CollegeAdvantage 529 Plan as one of the best in the nation due to its excellent mix of quality, low cost funds, and the lack of extra administrative fees found in many other plans. You can read Morningstar’s review for more information.
- Future tax breaks. Contributions to 529 plans are made with after tax dollars and can be withdrawn tax free for qualified educational expenses. This is similar to the benefits of investing in a Roth IRA.
- Potential current tax breaks. OH residents may be eligible to deduct up to $2,000 in contributions per beneficiary, per calendar year, with unlimited carry forward in future years. This plan is still a good option for non-Ohio residents, even without a tax break.
- Transferability. You can invest in a 529 College Savings Plan for yourself, and if you decide you won’t use it, then you can transfer the benefits to another family member. That flexibility is a big reason why I signed up for a 529 plan before our child was born. I may not use it myself, but I can transfer the funds to her when she is ready for school.
Additional Highlights of the Ohio College Advantage 529 Plan
The Ohio College Advantage College Savings plan is open to residents of all states, is rated as “Top 5” in the nation by Morningstar, and features low cost investment options (including several options from Vanguard). It’s even better if you an Ohio resident and are able to deduct our contributions from our state income, but as we mentioned, this plan is open to residents of any state.
Here are some of the other benefits of the Ohio College Advantage 529 Plan:
- No enrollment fees or maintenance fees.
- Open with as little as $25
- Wide variety of investment choices including low cost Vanguard plans (most investments feature extremely low expense ratios).
- Tax breaks on contributions for OH residents
- Open to residents of any US state.
- $25 sign up bonus*.
*$25 Sign up Bonus. From time to time, the Ohio College Advantage Plan offers a sign up bonus for new accounts, or for setting up an automatic contribution plan. Because of the bonus system, we actually opened our 529 plans before our daughter was born, with the intention of transferring the funds to her name when she is older.
How to get the $25 College Advantage sign up bonus.
- Open a new College Advantage 529 Savings Plan with a minimum of $25.
- Enter the following referral code: 2534946
- Receive your $25 bonus within 7-10 business days.
Update: The referral program seems to be over at this time. I will update this page if the referral program returns. That said, this 529 plan is annually rated among the best in the nation. I highly recommend it!
How to Transfer Your College Advantage 529 Savings Plan
Even though the College Advantage program is located in Ohio, it is open to residents of any state. The Ohio College Advantage 529 Savings Plan is also rated as one of the best 529 college savings plans in the US. That said, if you are not an Ohio resident, you may not be eligible for the state tax deductions that many states offer for 529 plan contributions.
My wife and I were previously Ohio residents, and were able to gain tax savings with our contributions. But now that we have moved to Illinois, it makes more sense for us to make contributions to the Illinois 529 plan in order to take advantage of deductions on our state income taxes. The good news is the Illinois 529 plan has excellent, low-cost investment options, so we’re not missing out by contributing there.
That said, it does make sense for us to consolidate our 529 plans to reduce the overhead that can come from managing too many accounts. There generally isn’t a federal tax issue from transferring your 529 plan to another 529 plan. However, you may have to pay state income taxes if you previously received a deduction – check with your state or an accountant before assuming there are no tax consequences.
These accounts can be consolidated using a New Beneficiary/Transfer Form. This six page form can be requested by mail or downloaded from College Advantage Forms.
You will need the following information to transfer your 529:
- The College Advantage account number
- Owner’s full name, social security number, date of birth, and relationship to beneficiary
- The owner’s mailing address, residential address, and telephone number(s)
- Additional information needed for owner identity verification includes the owner’s name, driver’s license or state-issued I.D. card number and the owner’s mother’s maiden name
- Current beneficiary’s full name and social security number
You will also need the following information for the new beneficiary (the person whom you are transferring the account to):
- Current CollegeAdvantage account number (if existing)
- Relationship of new beneficiary to current beneficiary
- New beneficiary’s full name, social security number, date of birth, and mailing address
Completing the Transfer
Once you obtain the forms and fill out all required information, you will be asked several questions concerning the amount of money to transfer. You have three options: (1) entire account while keeping current investment options, (2) partial while keeping investment options, or (3) transfer of all or partial while changing the investment options.
NOTE: If you are transferring from a CD you must also include the certificate number.
You will also have the option to keep Electronic Funds Transfer (EFT) as they are, transfer to the new account, or stop the transfers.
Finalizing the 529 transfer
In order to finalize the transfer, your signature and the signature of the beneficiary (if over 18 and the account was opened before 10/1/96) are required. The signatures must carry a signature guarantee. According to the form, “A signature guarantee is a stamped or typed assurance by a financial institution that indicates a signature is valid. A Notary signature and stamp ARE NOT acceptable for this form.” Give yourself ample time to take the forms to a financial institution to get the signature guarantee. Do not sign the forms until you are in front of the witness at the bank.
Once the signature guarantee has been placed on the form, make copies for your records and mail the originals to the address indicated on the first sheet of the form.
That’s it! There may be rules concerning the transfer of the 529 to include early withdraw fees for CDs, penalties, and guaranteed savings funds, so consult your tax advisor before proceeding.