MoneyDo: Consider Saving For College Using A 529 Plan
It’s August already – that time of the year when a good number of us get back to writing checks for college or even private school tuition.
If you’re considering how you can be better prepared to make tuition payments for a child, another relative, or even for your own studies at some point, a 529 savings account is often an excellent option.
529’s differ from a regular savings account because earnings accumulate in a 529 plan on a tax-deferred basis. Qualified distributions from a 529 plan are entirely tax-free.
A 529 can be set up for you through a variety of different custodians/providers. The most common one we talk about here in Wisconsin is Edvest.
Edvest allows individuals to open an account on behalf of a designated beneficiary. All contributions are placed into a trust fund established by the State of Wisconsin, which is then directed into special investment portfolios designated and managed specifically for the program.
Edvest’s earnings will grow federal- and state-tax free in Wisconsin, as well as potentially tax-free in other states, until the account’s beneficiary is college-bound. 529 funds can then be used to pay for qualifying higher expenses at any eligible school – including primary school, two and four year colleges, technical, vocation, and education schools.
In 2019, contributions to a 529 made by any Wisconsin adult can reduce their state-taxable income, dollar-for-dollar, up to $3,280 per beneficiary per year. The contribution may be made to an existing account you own, another Wisconsin account, or to a new one.
If you’re worried about over-contributing to a 529 account, you can always change the beneficiary at a later point. For example, if one child receives a scholarship and won’t need as much in funds for school, you can transfer any excess from his or her 529 account to another individual’s 529 plan.