Skip navigation.
Go to the Principal Financial Group(R) home page
Secure  Account Login

Select login type:


Saving For...
Quick Links
Tools

Coverdell Education Savings Account

With changes in legislation due to the Economic Growth and Tax Relief Reconciliation Act, a Coverdell Education Savings Account (formerly Education IRA) has become a more effective savings tool.

You can contribute up to $2,000 each year per child. All earnings are tax-deferred. The child can use the money, tax-free, to pay for qualified education expenses.

A Coverdell Education Savings Account:

  • Is set up and managed by a parent or guardian for the benefit of a minor
  • Grows tax-free until distributed
  • Allows tax-free withdrawals for qualified expenses

Coverdell Education Savings Account details:

Eligibility Anyone can contribute to a child's education savings account, but the designated beneficiary must be a minor when the account is opened
Annual Contributions* $2,000 per year until the child's 18th birthday; can be used for elementary, secondary, and post-secondary school expenses
Tax Advantages* Earnings and withdrawals are tax-free if used for qualified elementary, secondary, and post-secondary school expenses
Deductibility of Contributions None
Income Eligibility Requirements
  • Single: $95,000 - $110,000
  • Married filing jointly: $190,000 - $220,000

* Based on 2002 tax year


What are the advantages of a Coverdell Education Savings Account?

  • Wide choice of investment options
  • Low cost
  • Can be used for primary, secondary and higher education expenses
  • Tax-free withdrawals for qualified expenses
  • Family members and corporations can contribute
  • Investment control
  • Beneficiary can be changed at any time

What are the disadvantages of a Coverdell Education Savings Account?

  • $2,000 annual limit per child
  • 10% penalty and earnings taxed if not used by age 30 or beneficiary isn't changed
  • May affect financial aid - considered a student asset
  • Contributions restricted or disallowed for high income donors
  • May not fully fund a child's education costs

Questions
If you have questions, please contact us at 1.800.247.8000 ext. 472.

 

Have a question? Call us at 1.800.986.3343

Copyright © 2009, Principal Financial Services, Inc.
Disclosures and Terms of Use | Privacy and Security
Securities offered through Princor Financial Services Corporation, member SIPC