Back to school savings opportunity


Higher education becomes more expensive every year, and no matter their child’s age, many parents continually wonder how they are going to pay for college.

One option for saving for college is a 529 plan. 529 plans help families save for higher education similar to how IRAs and 401(k) plans help save for retirement.

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Wisconsin’s 529 plan is called EdVest. The plan is administered by Wisconsin’s Office of the State Treasurer and is managed by Wells Fargo Funds Management LLC. The underlying investments are managed by Wells Fargo Funds Management LLC; Legg Mason Capital Management Inc.; Robert W. Baird & Co. Inc.; and The Vanguard Group.

Investment options are chosen when an account is opened. Allocation changes may be made once per calendar year or if a designated beneficiary is changed. EdVest has 12 portfolio options from which you may select once you determine your personal risk tolerance and length of time until your beneficiary starts college.

Parents or other family members open accounts on behalf of a designated beneficiary, and anyone may contribute to the account. The party that opens the account retains control of its funds and can change the beneficiary at any time.

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Funds contributed are eligible for a Wisconsin state tax deduction of up to $3,000 per beneficiary per calendar year if the beneficiary is a child, grandchild, great-grandchild, niece, nephew, or yourself. Earnings grow federal and state tax free for Wisconsin residents. Withdrawals are also tax-free provided the funds are used for expenses such as tuition, fees, books, and supplies.

For federal financial aid purposes, the account is generally considered an asset of the account owner. However, 529 accounts owned by a dependent student will be considered an asset of the parent. 529 accounts owned by an independent student are considered an asset of the student for financial aid calculations.

If the beneficiary decides not to pursue higher education the beneficiary can be changed to another family member or passed to a next generation. 529 plans can also be closed, but the plan holder will incur a 10 percent penalty and will owe federal and state taxes on its earnings.

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