Help getting out of a 529?

I have about $5k in the Ohio 529 growth plan. I'm no longer in Ohio(Texas now) so I don't get the benefit of the state income tax deduction. I'm also dismayed by the lack of direct options as they relate to mutual funds.

1) What is the best option for saving for my kids ages 8,5,1?
2) Can I rollover this 5k into something without a tax and/or penalty hit?

You can execute a direct rollover to another 529 plan. However, since I am assuming you took the state deductions, you will have to pay them back in full when you roll it over.

Why not leave it there and open another 529 or similar savings plan? You can have more than one 529 per beneficiary.

I don't feel like I have enough control over my investment. Any other ideas?

Not that I know of. The lack of control is definitely one of the major disadvantages of the 529.

A Coverdell would provide you with the control you want, but the annual contribution limit is only $2000 and only then if your AGI qualifies you to contribute.

I don't think you can roll into a Coverdell from a 529, but I'm not sure about this. Let's put the question out.

Can anyone expand on this?

Another option (albeit a poor one) is to calculate your tax hit and decide if you want out bad enough. This could be very unwise, especially if you have taken state deductions in the past.

kmatwill - There is no "getting out" of 529 without taxes or penalties, except for circumstances described in IRS Publication 970.

There are several 529 plans that offer single fund portfolios that allow account owners to select from available fund offerings. TX and NE offer these directly (TX only for residents).

Presumably you deducted your OH plan contributions from your OH state tax returns. You are in the grey zone, as far as I understand it, if you are no longer a OH taxpayer, I am not sure that OH can recapture your previously claimed deductions. I am no tax expert - it may be worth checking to see if that is feasible.

TJ

It's funny you mention Texas, because that's where I live now. Also, I do still pay taxes in Ohio because I own a rental property there.

It's actually not all that funny - you mentioned currently living in TX in your initial post. I was writing to that. ;)

If you're paying income tax in OH, I am not sure there is any way that you can pull out of the OH plan with having the previous deductions recaptured by the state which, effectively, is a tax hit. But keep in mind that the value of those recaptured deductions could get reduced by your federal tax rate, since you might be able to claim them as deductions on Schedule A.

TJ

Ha! Now that is funny. :) Thanks for your advice