Ohio CollegeAdvantage Named One of the Best College Savings Plans

Ohio CollegeAdvantage 529 Plan $25 Referral BonusLast week, Morningstar released its annual evaluation of the nation’s 529 college savings plans and named Ohio CollegeAdvantage Plan, the one we are using to save for our younger daughter, one of the 5 best college savings plans. The Morningstar report cited the following features as what makes the plan stand out from the crowd:

One of the most important features of this plan is that the Ohio Tuition Trust Authority not only created the plan, but it also manages it directly. (Most 529 plans, by contrast, use mutual fund companies as program managers.) This setup is rare in the 529 universe and it gives the OTTA more freedom to choose from a variety of mutual fund families, such as Vanguard, PIMCO, GE Asset Management, and Fifth Third Bank (for CD options). We like the flexibility here, too. The plan offers four distinct age-based options–all with sensible asset-allocation schemes–with a choice between active and index strategies. Additionally, it offers a bevy of individual fund options–both active and passive. Finally we like the low fees of this plan. Total expenses are 0.23% to 0.47% for the age-based options, 0.24% to 0.46% for the static options, and 0.23% to 0.91% for individual fund options. And the deal is sweetened for in-state residents who can deduct up to $2,000 of contributions. (Excess contributions can even be deducted in later years.)

Low-cost is one of the reasons I chose this plan over others two years, even though I got no tax benefits from using this plan. The fund I selected from the plan is an age-based portfolio run by Vanguard, which is why it can keep the cost low. Also, the plan doesn’t charge an annual maintenance fee, which is another plus. If you are interested in this plan, you can get  a $25 bonus from CollegeAdvantage when you open an account before May 31 using reference code 2331122.

Other plans picked by Morningstar as the best include:

  • Indiana CollegeChoice 529 Direct Savings Plan: This plan, managed by UPromise, includes funds from Vanguard, Dodge & Cox, and Western Asset. Fees of this plan range from 0.35% to 0.95%. The plan, however, charges $20 annual account fee for non-residents.
  • Utah Educational Savings Plan Trust: The Utah plan is run by UESP Trust. The costs of investing with UESP is very low, from 0.22% to 0.35%. The plan has the maximum annual fee of $15.
  • Virginia Education Savings Trust
  • Virginia CollegeAmerica 529 Savings Plan

The last two plans, Virginia Education Savings Trust and Virginia CollegeAmerica 529 Savings Plan, are also winners from last year’s selection. Highlights of these two plans can be found in my previous post.

When Morningstar evaluates 529 plans, they emphasis a lot on the plan’s asset-allocations, plan fees, flexibility of investment, and the overall quality of underlying funds. Sounds pretty simple and straightforward, but not every plan possesses these qualities. For example, Morningstar picked the following plans as the worst:

  • Nebraska State Farm College Savings Plan (OppenheimerFunds)
  • New Jersey Best 529 College Savings Plan (Franklin Templeton)
  • Montana Pacific Life Funds 529 College Savings Plan (Pacific Life Funds)
  • Ohio Putnam CollegeAdvantage (Putnam)
  • Nebraska AIM College Savings Plan (Invesco Aim Capital Management)

for either lacking quality funds, or charging high fees to participate in the plan. With so many good to choose from (like those mentioned above), hope you are not using a plan that’s at the bottom of the ranking. While a tax break is always good to have, the overall quality of the plan is always more important to me.

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