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College Investing - Changes

November 9th, 2010 at 01:53 pm

I've just read that ESA's or Coverdale Savings Accounts are going to revert back to a limit of $500 per year investment limit in 2011, unless Congress makes changes. We have been saving in ESA's. So...now we have to make changes.

I liked the flexibility of the ESA, but it looks that most of our money will now need to go to a 529 plan. With having it in a state plan, it just seems frustrating if we move from state to state while we are saving. Have to give the state tax deduction back...at least I think that is what I read. For now, I think I'll just leave the ESA money where it is and start anew.

We also have UGMA accounts for our girls which we have not regularly been investing in. I guess I need to consider it all.

Anyone have thoughts or ideas for me?

Posted in Saving, Family | 3 Comments »

3 Responses to “College Investing - Changes”

  1. MonkeyMama Says:
    November 9th, 2010 at 02:10 pm 1289311854
    1289311854

    No thoughts, but yeah, I have avoided the ESAs because they are generally being phased out (& replaced by 529 plans). As such, I don't expect the current benefits to be extended for any reason.

    I don't think you have to give the state deduction back - you just won't get it if you move to another state. Only roughly half the states have 529 tax deductions (though some states have no income taxes, which makes that a moot point).

  2. creditcardfree Says:
    November 9th, 2010 at 02:27 pm 1289312861
    1289312861

    Well, it looks like it's only an issue if we would roll the money over to another state. It's called a recapture penalty for Iowa. Darn. I wish I was clear about this earlier. I wonder how easy it would be to get the ESA money we invested this year into a 529 by the end of the year...or do I have until April 15th? The money is already at Vanguard...but DH is out of the country so I might have to use my power of attorney since one ESA account he is the custodian.

  3. MonkeyMama Says:
    November 9th, 2010 at 02:40 pm 1289313634
    1289313634

    Interesting - I hadn't heard of the recapture penalty for some states. Ouch!

    I'd think it would be relatively easy to get it transferred - I'd ask Vanguard. Is there a reason it would have to be transferred in 2010? If so, probably by 12/31, but I am not sure.

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