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College Tuition Calculator

Coverdell IRAs
(formerly known as Education IRAs)

1. Saving for your child's education can be tricky. To maximize savings while minimizing taxes, many folks are using Coverdell IRA's (formerly known as Education IRA's) and custodial accounts. Contribution this year has been increased from $500 to $2,000.
2. There's also a (relatively) new option you should know about: the 529 Plan (College Savings Plan). A 529 Plan allows you to either prepay tuition for qualified colleges or save funds in a tax-free account to be used to pay higher education costs. You can do this for any child in your life--your child, your grandchild or the child next door who mows your lawn. (If you are going back to school, you can even set up a 529 Plan for yourself.) And you don't necessarily have to live in the state of the plan that you choose. Tax Advantages:
The numerous tax benefits are one of the reasons why saving for college with the College Savings Plan makes sense. Money in the account grows tax-deferred, and with the new tax law changes, all qualified withdrawals for higher education expenses are tax-free. Also, money in a 529 plan is excluded from the account holder's taxable estate. For estate planning purposes, the College Savings Plan is an excellent way for you to remove money from your estate while helping a loved one afford a college education. Affordability:
The College Savings Plan is designed to meet the needs of every family and every budget. There is no minimum annual contribution required. The account holder can contribute a maximum of $11,000 per year per beneficiary without incurring federal gift taxes. A 529 plan is the only way to contribute as much as $55,000 in one year without incurring federal gift taxes. The $55,000 contribution counts for the current year ($11,000) gift and for the next four years ($44,000) gifts to that beneficiary. The Plan has a generous overall account balance limit of $250,000 per beneficiary. Contributing to the plan is also simple and easy. Account holders can deposit by check, through automatic account withdrawal, or automatic payroll deduction (if their employer provides this service). Flexibility:
There is maximum account flexibility with the College Savings Plan. Withdrawals from the account can be used at eligible schools nationwide. This plan covers almost all expenses related to college including tuition, fees, room and board, books, equipment, and supplies. If the child decides not to attend college or does not use all of the funds, the account beneficiary can be changed to another member of their family. The account owner can even take the funds back, subject to taxes and a penalty on the earnings portion of the withdrawal. If account owner needs to withdraw some of his funds for non-college related expenses, the withdrawal is taxed at his normal tax rate plus a 10% IRS penalty on the earnings portion of the withdrawal. If the beneficiary receives a scholarship, the account owner may withdraw funds up to the amount of the scholarship, without paying the 10% IRS penalty on the earnings portion of the withdrawal. The IRS penalty is also waived if the beneficiary passes away or becomes disabled. The plan we use is available through TD Waterhouse. Contact us at Pearson Capital for any additional information. We can assist you or someone of your choosing to get started.

DISCLAIMER:
Information has been obtained from sources deemed to be reliable, Pearson Capital, Inc. makes no guarantee as to the accuracy or completeness of this data. Information is provided for informational purposes only, and Pearson Capital, Inc. shall not be liable for any errors or omissions, or for any actions taken in reliance thereon.