October

14

What if education costs are less than your Coverdell IRA value?

Comments(3) | Under: Education Topic

If the education IRA and 529 plan I have for my son grows in value such that all education expenses are completely covered, what happens with the remainder? If there is a penalty, what is the rate?

Related education posts:

  1. Education? Identify three global trends that have impact on planning for education in the Philippines. EXPLAIN. Identify three national scenarios that have impact on institutional planning for education in the Philippines.EXPLAIN Discuss how the work and financial plan is related to...
  2. What grade should sex education start, in public schools ? The stork delivering babies should be shot out of the sky in 1st grade. And the sex education continues from there. Contraception, protection from ST-D’s and the high divorce rate for teenagers. All taught,before 7th grade (13 yrs old). When...
  3. Recovery: Education Credits – Parents – June 09 Parents profitable for college or college-related losses for their young kids might be means to good from these losses during taxation time. This video provides some-more report upon a American Opportunity Credit as well as taxation service associated to mechanism...
  4. Recovery: Education Credits – Parents – June 09 Parents profitable for college or college-related losses for their young kids might be means to good from these losses during taxation time. This video provides some-more report upon a American Opportunity Credit as well as taxation service associated to mechanism...


3 Responses to “What if education costs are less than your Coverdell IRA value?”

  1. will_work_for_trump Says:
    October 14th, 2009 at 7:33 am

    Your educational IRA money has to come out by age 30 but the 529 plan has no age limit. Also, the educational IRA can be spent on any education ( high school, grade school, etc.) but the 529 plan can only be spend on college. Therefore, if it looks like you have over-funded:

    1. Use the educational IRA on high school and grade school expenses.
    2. Spend the educational IRA first.
    3. If there is any thing left in the 529 plan when your son finishes college, leave it in there. If you end up needing it for your retirement, spend it last. You will pay income tax and a 10% penalty on any earnings in the account that are withdrawn for non-educational purposes at that time. If you don’t need it for your retirement, make your son the successor owner and keep it available for a grandchild or other relative.

    Jim KIrby, CPA/PFS, CFP, CFS

  2. v b Says:
    October 14th, 2009 at 7:33 am

    Remember that the original contributions were after tax money, so only the earning can be taxed as income and subject to a 10% penalty.

    For both funds, you can roll the money to another student (up to a first cousin).

  3. ninasgramma Says:
    October 14th, 2009 at 7:33 am

    If you withdraw the money and do not spend it on education, you will generally face a 10% penalty on the earnings.

    However, you can keep that money available for your son until he turns age 30. Perhaps he wants to go to graduate school, or you can assign the account to a grandchild.

Leave a Reply