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Lifestyle Q & A Forum

What is this Education IRA all about?

by
Marc Freedman, CFP Certified Financial Planner Freedman Financial Associates, Inc.



Question:
What is this Education IRA all about?
Answer:
The Education IRA, introduced by the Taxpayer Relief Act of 1997 is an interesting new concept. It is designed for people saving for a child's future educational expenses. Beginning this year, an annual, non-deductible contribution of up to $500 per year, per child may be invested until the child reaches age 18. Withdrawals to pay for college expenses for the child are tax-free. The $500 contribution is phased out, however, for single taxpayers with an adjusted gross income above $95,000, ($150,000 on a joint return)

The government is considering an increase to allowable annual contribution. Most financial institutions have programs to help you open an education IRA. Be sure you have your child's social security number before you apply.