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Education IRA... Page
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- Flexibility. Any qualifying individual
can contribute to an Education IRA on the behalf of another beneficiary, not just their
own dependents.
The Education IRA can be rolled over to another family member (brother, sister, son,
daughter, stepbrother, stepsister, niece, nephew, etc.) if the beneficiary doesn't use the
money to attend college. Any unused portion of the account can also be rolled over to
another Education IRA.
Tip: If you're younger than age 30 and plan on having kids, you can get a
big head start on saving for your child's education. Simply open an Education IRA in your
name, contribute to it annually (until you're age 30), and roll it over to your new son or
daughter when they're born.
- A parent or guardian named on the
account is responsible of the IRA until it's completely withdrawn.
Disadvantages
- When you consider the future costs of a
college education for your child, $500 a year may not be enough. Any delay in opening an
account for your child is lost money -- and a lot of time to make up.
- In the year that you take distributions
from an Education IRA, you become ineligible for other college savings programs or tax
credits such as a prepaid tuition plans, the Lifetime Learning Credit, or the Hope
Scholarship. A student's ability to get financial aid may be limited by the assets that
have accumulated in their Education IRA.
The Education IRA is a great college
savings tool. If used right, it can mean the difference between having to seek financial
assistance and affording college on your own. As with any IRA, make sure you've done
plenty of research before committing to a plan.
Next: Financial Aid 101
College Planning Calculators:
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• What will it take to save
for a college education?
• How much will it cost to
raise a child? |
