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Beginner's Guide to a Coverdell Account (ESA)


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Overview of a Coverdell Accounts (ESA's)
College Savings Account Profile: Coverdell Education Savings Accounts (a.k.a. the Education IRA)


The Coverdell ESA was originally introduced in 1997 as the Education IRA. In 2001, Congress expanded its benefits and renamed it the Coverdell Educational Savings Account (ESA).

The account allows up to $2,000 per year in after-tax contributions to be made in a child’s name. These contributions grow tax-deferred and may be withdrawn tax-free for qualified educational expenses.

If the money is not used by the time the child turns 30, it must be given to them or rolled over to a Coverdell ESA for another family member.

Ideal Investor:

A Coverdell ESA is ideal for parents or grandparents who have some combination of the following factors:

  • They have multiple children with the hope that all will attend college.
  • They are starting their college planning early in their children’s lives.
  • They are planning on saving large amounts towards college costs.
  • Their children may attend private elementary or secondary schools.
  • They want a high level of flexibility with their investment choices.
  • They are under the income limits for contributors ($95,000 for single filers, $190,000 for married couples).

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