The Education IRA

Advantages

• Tax-free accumulation and tax- and penalty-free withdrawals for qualified higher education expenses.
• Funds are clearly set aside for child.
• Can be rolled over into an Education IRA for another family member (subject to certain requirements)
• Anyone can contribute -- parents, grandparents, other relatives, friends, or the child him/herself.

Considerations

• Limited to a contribution limit of $500 a year per child.
• You cannot make full contributions if your income exceeds $95,999 (single) or $150,000 (joint).
• It may restrict eligibility for financial aid and tax credits.
• Plan to use this for the last year of college or graduate school to give it longer to grow.
• Cannot contribute in the same year a contribution is made to a state prepaid tuition program.

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