Manage Your Own 529 Plan
by Jane Bennett Clark, from Kiplinger's June issueWant to steer your college fund through the high seas yourself? With a Coverdell Education Savings Account, you can manage your own investments.
by Jane Bennett Clark, from Kiplinger's June issue
Want to steer your college fund through the high seas yourself? With a Coverdell Education Savings Account, you can manage your own investments. You set up the account at a sponsoring institution, such as a bank or mutual fund. As with 529 plans, the money grows tax-free, but with the Coverdell, you can withdraw money tax-free for elementary and secondary-school expenses as well as college costs.
To get in on this deal, your adjusted gross income must be $110,000 or less ($220,000 or less for married couples filing jointly). You can contribute up to $2,000 a year.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
You won't get a state tax deduction for the contribution, but you can roll the amount over to a 529 plan later without tax or penalty and grab the deduction then, getting the best of both worlds.
The switchover works only in one direction. If you move the 529 account into a Coverdell, you pay tax and a penalty. Be aware that the Coverdell will revert to less-generous terms in January 2011 unless Congress extends the current provisions.
For more college savings help, see our latest coverage: Salvage Your College Savings
RELATED CONTENT:
Changing Coverdell Beneficiaries
Best Ways to Cash In College Savings
Which College Savings to Tap First?
Kiplinger's Paying for College Center
Get Kiplinger Today newsletter — free
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.
-
Voters Approve New Veteran Property Tax Relief
Tax Relief Thanks to the election, some Veterans will soon see expanded property tax exemptions.
By Kate Schubel Last updated
-
Should You Trust Robo-Advisers With Your Retirement?
Why use a financial adviser when you can get retirement planning tools online? The simple answer: Tech can't yet replace nuanced advice from a professional.
By Scott Noble, CPA/PFS Published
-
529 Plans: A Powerful Way to Tackle Rising Education Costs
Contributions to 529 plans grow tax-free and are not taxed when they are used to pay for qualified educational expenses for the beneficiary.
By Denise McClain, JD, CPA Published
-
Tax Tips for Transferring Excess 529 Plan Funds to Roth IRAs: The Tax Letter
The Tax Letter 529 plans can help blunt the cost of paying for college. But if you want to use leftover funds there are some tax tips to bear in mind.
By Joy Taylor Published
-
529s: No Longer the Ho-Hum Investing Device for College
Changes to the plans allow for the savings to be rolled into a Roth IRA, as long as certain rules are met, if a child decides not to pursue their education.
By Neale Godfrey, Financial Literacy Expert Published
-
529 Plans: Give the Gift of Education (and Compounding)
As the cost of college tuition skyrockets, parents and grandparents can take advantage of tax-efficient 529 plans and higher limits on gift and estate taxes.
By Mel Casey, CFA®, CAIA Published
-
Have Leftover 529 Funds? Expert Strategies for Unused Balances
Excess 529 funds represent both a challenge and an opportunity, and knowing your options is essential.
By Marguerita Cheng Published
-
Using a 529 Plan? Here’s What to Keep in Mind
As the school year progresses, ensure you’re using the money for qualified expenses and keeping track of documentation. Taxes and options for unused funds are also considerations.
By Julie Virta, CFP®, CFA, CTFA Published
-
Five Ways to Save on Vacation Rental Properties
Travel Use these strategies to pay less for an apartment, condo or house when you travel.
By Cameron Huddleston Last updated
-
How to Avoid Annoying Hotel Fees: Per Person, Parking and More
Travel Here's how to avoid extra charges and make sure you don't get stuck paying for amenities that you don't use.
By Cameron Huddleston Last updated