As published in the Racine Journal Times | June 9, 2013
An interesting survey conducted by Edward Jones earlier this year indicated that 69 percent of Americans were unaware that 529 Plans were for college savings. I’d like to think that the other 31 percent who know about 529 Plans are the ones with children but I suspect there are many folks with children who are also unaware. Fortunately, Wisconsin has one of the better college savings plans as each state typically administers their own plan.
The name 529 Plan simply refers to the tax code section that created these types of tax-advantaged accounts to save for college education. In Wisconsin, the 529 Plan is also known as Edvest which is the state-approved plan.
While there’s no requirement that you must use your own state’s plan, Wisconsin provides an added incentive for residents to use the local option in the form of an additional tax deduction for state income taxes up to $3,000 per child each year. In addition to the state income tax deduction, the major benefit of 529 Plans is the tax-free nature of earnings used towards qualified higher education expenses.
Higher education institutions include public and private universities as well as technical and community colleges whether they’re in Wisconsin or elsewhere. This is an important point as many people incorrectly assume the money in an Edvest account can only be used for Wisconsin colleges. Qualified expenses include tuition, fees, and books. If the student is at least half-time, room and board is also a qualified expense. Even students living at home can make withdrawals based on their school’s “cost of attendance” allowance used for financial aid calculations.
Last fall, Edvest changed the plan manager which was a positive change as it lowered the costs in the plan and added additional investment options. It also lowered the minimum amount to open an account to $25. Anyone can contribute to someone else’s Edvest account although you must be a family member to receive the state tax deduction.
Edvest provides a range of investment options including funds invested only in stocks to one paying 1.25 percent interest in the Principal Plus fund. There are also options which automatically adjust the allocations based on the child’s age to reduce the exposure to stocks as the child gets closer to college age.
To learn more about the specifics of Edvest and to open an account online or request more information, visit www.edvest.com which not only includes information on the program but also tools to calculate future college costs and other resources for college planning.