A. Educational IRA’s allow you to put away $500 per year per child. The contributor cannot have an income over $100,000 AGI. If the money is used for authorized college expenses, the proceeds can be taken out tax-free. Some of the state education plans are better because you can put in more money. Issues to consider include: what happens if your child does not go to a college in that state, the possibility of a partial or full scholarship, the possibility that the child will defer going to college for a period of years, that they may attend a non-qualified technical school, or establish a dot.com business in your garage after dropping out of Harvard. Some of the older State plans only work well if your child attends a state college in the state where the plan was established, and are quite inflexible under any other set of circumstances. Many of the newer State plans now favorably address a number of potential alternative circumstances to immediate, in-State college attendance after high school. Your financial planner can assist you in identifying the advantages and disadvantages of the various State plans throughout the country.

Previous Question

Next Question