How to Create a Will
Get started with the basics of estate planning by creating a will.
The right investment plan will help secure you and your loved one’s future!
Your college savings plan needs to work with your family’s timeline and budget. With how many short and long-term options are out there, surely there’s a fit for you. Let’s talk about how you can strategically get started saving for a child’s education in Ohio.
Most financial advisors will tell you that you need to start saving for higher education costs as early as possible. Why is that?
Getting started does not require much money. The goal is to keep setting funds aside regularly until your child finishes high school.
Ready to start contributing? Find the right plan for you below!
CollegeAdvantage 529 is by far the most popular investment option in the state of Ohio. Tax-free and with higher earnings than a traditional savings account, a 529 is a very approachable and sought-after investment option. Dozens of low-cost investment options, including some by Vanguard, are available to account owners.
These accounts only cost $25 to open, and Ohio taxpayers receive up to a $4,000 state income tax deduction per child each year. Plus, only 5.64% of the account’s value counts towards Expected Family Contributions, so your child will still be able to maximize their student aid.
Minors cannot own stocks, bonds, mutual funds, and other investment vehicles in Ohio, so parents often turn to trusts instead. Two of the more popular options are The Uniform Gift to Minors Act (UGMA) and The Uniform Transfer to Minors Act (UTMA). You would save and invest in both similarly to how you would with a traditional investment account. However, you should know that these trusts have a much higher impact on your family member’s financial aid eligibility than the 529 college savings plan. Since students will ultimately own their accounts (instead of their parents), their financial aid rewards reduce by 20% of their account value.
The advantage of UGMA and UTMA accounts is that they offer more flexibility than other investment options. There is no tax penalty or qualified withdrawals, so this money does not need to be used for college expenses should your child consider a different path. Also, up to $15,000 per person or $30,000 per married couple in contributions can be made without incurring a gift tax.
Coverdell ESAs are similar to 529’s terms and withdrawal policies. They are also tax-deferred and tax-free as long as the funds go towards eligible education costs. Only 5.64% of your account’s value will be counted against you when calculating federal financial aid.
The main difference between the two savings accounts is that Coverdell ESAs offer more investment vehicles than 529s, which are limited to mutual funds and other safer investment options. Owning individual stock comes with an increased risk, so it’s best to start as early as possible if you opt for this route.
It’s also worth noting Coverdell ESA’s have a contribution limit of $2,000 per person per year and that your funds can also be used towards certain elementary and secondary school expenses.
You may be familiar with mutual funds if you own or manage a personal investment portfolio. The main draw to this type of investment option is it offers greater flexibility and control. As the fund owner, you can personally choose which funds you’d like to invest in. And, since they’re not affiliated with school savings in any way, you don’t have to use your withdrawals solely on qualified higher education expenses.
Traditional college savings programs typically offer better tax benefits, but mutual funds have the potential for a higher payout. They’re getting easier to manage passively, but you should still consult with a financial advisor to understand the implications of this or any other college savings plan.
And for that, you don’t have to look any further than Royal Oak Financial Group! Investment management is our specialty, and we’re devoted to helping Ohio families find the right plan to secure a stronger financial future. Contact us today to discuss college savings plans in Ohio for you and your loved ones!