Sunday, September 21, 2014 12:05pm
North Adams, MA now: 79 °   
Send news, tips, press releases and questions to info@iBerkshires.com
The Berkshires online guide to events, news and Berkshire County community information.
SIGN IN | REGISTER NOW   

Home About Archives RSS Feed
The Independent Investor: An Educational IRA for Kindergarten and Above
By Bill Schmick On: 06:38PM / Thursday March 28, 2013
Important
0
Interesting
0
Funny
1
Awesome
0
Infuriating
0
Ridiculous
0

Most savers are familiar with state-sponsored 529 Plans, a tax-advantaged savings plan to help put your children through college. However, there is another savings plan that could assist you in meeting the bills for school Grades 1 through 12 as well as college. It is called a Coverdell Education Savings Account (ESA).

This plan is ideal for families with multiple children or who want to start saving for their children's educational needs early in their lives. In addition, if you are thinking of sending your child to an independent or private school (or prep school) prior to college then this ESA is meant for you.

You can contribute $2,000 annually to an ESA, although similar to a Roth IRA, contributions are not tax deductible. However, the earnings on contributions and distributions are tax-free as long as they are used for educational purposes. The tax-free money can apply to tuition, room and board, computers, laptops, supplies, tutoring and transportation as long as they are legitimate educational expenses. Attendance at colleges, secondary or elementary schools, as well as vocational schools and other post-secondary educational institutions (whether public, private or religious) are eligible.

Take the example of my grandson, Miles, he is 16 months old, lives in Manhattan and faces horrendous future educational costs. His mother wants to begin saving for his education now. I can't blame her. There are kindergartens in the Big Apple that will set you back $40,000, if you are so inclined. Private grammar and high schools could easily cost $100,000 plus.

Now $2,000 a year in savings doesn't sound like much if you live in Manhattan, but it will certainly help and elsewhere it could be a windfall for many lower-income families. If invested properly, five years of $2,000 contributions could generate a considerable amount of money. Money that would certainly pay for some of the expenses every child will incur through high school and beyond.

So what, you may ask, is the downside to ESAs? The $2,000 contribution per year, per student is negligible compared to the $14,000 a year you can stash away in a 529 Plan. There is also an income limit which kicks in for single taxpayers making over $110,000/year and married couples making over $220,000.

You also have to use the money before the child turns 30 years of age, otherwise the earnings (not the contributions) will be taxed and a 10 percent penalty will also be applied. You could avoid that by simply rolling over the full balance to another ESA for another family member.

The American Taxpayer Relief Act signed into law January 2nd removed any lingering uncertainty concerning the future of ESAs. They are here to stay just like 529 Plans. But unlike their bigger more popular brethren, you can manage your ESA yourself while saving hefty expenses that 529 Plans charge.

Many savers have also been disillusioned with the performance of their 529 Plans thus far. That is an important point since many hoped that the growth of these plan contributions would at least match the rate of increase of educational costs, which are about 6 to 7 percent a year.

If one can afford it, most planners recommend that families contribute to both plans. You still have time to open an ESA account and make a $2,000, 2012 ESA contribution. You can also contribute another $2,000 for 2013 if you are so inclined. The paperwork involved is no more onerous than a standard IRA application that you can obtain from most brokers or your local bank. Do your kid a favor, open an ESA today.

Bill Schmick is registered as an investment adviser representative with Berkshire Money Management. Bill’s forecasts and opinions are purely his own. None of the information presented here should be construed as an endorsement of BMM or a solicitation to become a client of BMM. Direct inquires to Bill at 1-888-232-6072 (toll free) or email him at Bill@afewdollarsmore.com.



0 Comments
     
News Headlines
Legislative Q&A: State Sen. Benjamin Downing
Williams Opens New Football Field With Shutout Win
MCLA Men's Soccer Wins League Opener; Tennis, Volleyball Win
Williamstown Resident Joins Cross-Country March for Climate Action
Lenox Briefs: Electric Group Purchasing Rate Chosen; OPEB Committee Being Formed
Last of Pittsfield Parks Bossidy Bucks Spent on Backstops
Campers Filling Field for Annual FreshGrass Festival
Cheshire Property Tax Rate Rising for 2015
Clark Offers Special Free Hours for Magna Carta Exhibit
Two Fundraisers Planned For Local Girl's Walk to Cure Diabetes Team
Bill Schmick is registered as an investment advisor representative and portfolio manager with Berkshire Money Management (BMM), managing over $200 million for investors in the Berkshires. Bill’s forecasts and opinions are purely his own and do not necessarily represent the views of BMM. None of his commentary is or should be considered investment advice. Anyone seeking individualized investment advice should contact a qualified investment adviser. None of the information presented in this article is intended to be and should not be construed as an endorsement of BMM or a solicitation to become a client of BMM. The reader should not assume that any strategies, or specific investments discussed are employed, bought, sold or held by BMM. Direct your inquiries to Bill at 1-888-232-6072 (toll free) or email him at Bill@afewdollarsmore.com Visit www.afewdollarsmore.com for more of Bill’s insights.

 

 

 



Categories:
@theMarket (144)
Independent Investor (196)
Archives:
September 2014 (3)
September 2013 (2)
August 2014 (7)
July 2014 (2)
June 2014 (6)
May 2014 (9)
April 2014 (8)
March 2014 (6)
February 2014 (6)
January 2014 (7)
December 2013 (8)
November 2013 (7)
October 2013 (6)
Tags:
Stocks Currency Stock Market Commodities Debt Ceiling Metals Stimulus Economy Retirement Housing Banks Pullback Jobs Recession Election Europe Fed Debt Federal Reserve Japan Markets Interest Rates Energy Oil Europe Fiscal Cliff Greece Deficit Congress Crisis Bailout Selloff Taxes Euro Rally
Popular Entries:
The Independent Investor: Understanding the Foreclosure Scandal
The Independent Investor: Don't Fight the Fed
The Independent Investor: Does Cash Mean Currencies?
@theMarket: QE II Supports the Markets
@theMarket: Markets Are Going Higher
The Independent Investor: General Motors — Back to the Future
The Independent Investor: How Will Wall Street II Play on Main Street?
The Independent Investor: Will the Municipal Bond Massacre Continue?
@theMarket: Economy Sputters, Stocks Stutter
The Independent Investor: Why Are Interest Rates Rising?
Recent Entries:
@theMarket: Waiting on the Fed
The Independent Investor: The United States of Scotland?
The Independent Investor: Europe Follows the U.S. lead
@theMarket: What's Up With Bonds?
The Independent Investor: Baby Boomers and Retirement
@theMarket: Labor on Their Mind
The Independent Investor: Financing ISIS
@theMarket: Geopolitical Risk Trumps Economic Growth
The Independent Investor: Beware the Russian Bear
The Independent Investor: Why Some Corporations Are Leaving America


View All
Football: Wahconah vs Drury
Final at Drury, Wahconah over Drury 42-6.
Girls Soccer: Lenox vs Hoosac
Hoosac Valley posts an 8-2 win over Lenox.
Walk a Mile at 3rd Thursday
The annual Walk a Mile in Her Shoes, kicking of September's...
Barrington Stage BYP Social
Berkshire Young Professionals were at the Barrington Stage...
Soccer: Wahconah vs...
The Pittsfield boys’ soccer team had the complete package...
Soccer: Taconic vs Drury
Drury boys soccer 3-1 loss to Taconic, Wednesday afternoon....
Golf: Monument vs Mount...
Two standout rounds for Mount Greylock and one standup move...
Volleyball: Lee vs Mount...
Lee 3, Mount Greylock 0, The visiting Wildcats won 25-23,...
Soccer: Mount Greylock vs...
Eric Hirsch scored twice and set up two goals to lead the...
Josh Billings RunAground 2014
The team from Pittsfield's Allen Heights Veterinary won the...
Football: Amherst vs Williams
Football: Amherst vs Williams in a scrimmage on Saturday...
Girls Soccer: Drury vs...
Taconic girls soccer team took a 3-2 win over Drury on...
Football: Wahconah vs...
The Wahconah Warriors tamed the Chicopee Colts 44-6 at home...
Football: Taconic vs...
The Taconic Braves ran over the Cathedral Panthers 20-8 at...
Youth Center Chair Reception...
Inspired seating was on display Saturday night in the...
Volleyball: Mount Greylock vs...
Mount Greylock bested Wahconah 3-2 on Wednesday night at...
Football: Wahconah vs Drury
Final at Drury, Wahconah over Drury 42-6.
Girls Soccer: Lenox vs Hoosac
Hoosac Valley posts an 8-2 win over Lenox.
Walk a Mile at 3rd Thursday
The annual Walk a Mile in Her Shoes, kicking of September's...
Barrington Stage BYP Social
Berkshire Young Professionals were at the Barrington Stage...
Soccer: Wahconah vs...
The Pittsfield boys’ soccer team had the complete package...
| Home | A & E | Business | Community News | Dining | Real Estate | Schools | Sports & Outdoors | Berkshires Weather | Weddings
Advertise | Recommend This Page | Help Contact Us | Privacy Policy| User Agreement
iBerkshires.com is owned and operated by: Boxcar Media 102 Main Street, North Adams, MA 01247 -- T. 413-663-3384 F.413-664-4251
© 2000 Boxcar Media LLC - All rights reserved