529 Plan vs. Coverdell IRA

Financial Advisor Christine Nielson shares advice for parents on the differences between using a 529 College Savings Plan or a Coverdell IRA to save for your children's college fund
529 College Savings Plan vs. Coverdall IRA
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529 Plan vs. Coverdell IRA

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Both 529 Plans and Coverdell IRAs are excellent ways to save for college. They both operate like a Roth IRA in that they're non-deductible and provide for tax-free growth. Withdrawals are also tax-free. One of the differences is a Coverdell Plan also, in addition to allowing you to save for higher education, also allows you to save for K-12 education, elementary and secondary school, whereas a 529 is just strictly for higher education. A Coverdell also has a contribution limit of $2,000 per year coupled with an income limit for the parents. If a single parent is earning $95,000 or more, the amount of the contribution is going to be phased out. If it's for a married couple, it's going to be $190,000 in income. A 529 Plan has no limits in that way. You can put in $100-$350,000 depending on the state you live in. A Coverdell Plan has some age limits on contributions and withdrawals. You can only contribute to the plan up until the child is age 18 and withdrawals have to be taken by age 30. On the other hand, a 529 has no age limits at all on contributions or withdrawals.

Financial Advisor Christine Nielson shares advice for parents on the differences between using a 529 College Savings Plan or a Coverdell IRA to save for your children's college fund

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Christine Neilson

Financial Advisor

Christine Neilson is from London, England and moved to the United States in 1991. She has a BA with honors in Business Studies with an emphasis in  Finance from South Bank University in London. Prior to moving to the United States, Christine worked in the computer industry for seven years as an operator and programmer before becoming a Surveyor specializing in commercial real estate appraisal, acquisition and development.  Having recently obtained her California and Washington real estate licenses Christine is merging her extensive financial advisory and real estate experience to provide unique expertise to clients.

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