Compare savings options

Summarizes and compares the features of 529 plans, ESAs, UTMAs, IRAs, and education savings bonds.

YEAR 2013 RULES	Roth IRA	UGMA/UTMA
Federal Income Tax	Non-deductible contributions; withdrawn earnings excluded from income after age 59 ½ and five years; 10% penalty on early withdrawals waived if used for qualified higher education expenses	Earnings and gains taxed to minor; first $1000 of unearned income is tax exempt; unearned income over $2,000 for certain children through age 23 is taxed at parents rate
Federal Gift Tax Treatment	No gift involved	Transfers treated as completed gift; apply $14,000 annual gift exclusion
Federal Estate Tax Treatment	Value included in the owner's gross estate	Value removed from donor's gross estate unless donor remains as custodian
Maximum Investment	$5,500($6,500 for taxpayers age 50 and over)	No limit
Qualified Expenses	Same as 529 plan	No restrictions
Able to Change Beneficiary	Not applicable	No; represents an irrevocable gift to the child
Time/Age Restrictions	Withdraw earnings tax-free only after five years and age 59 1/2	Custodianship terminates when minor reaches age established under state law (generally 18 or 21)
Income Restrictions	Must have taxable compensation; contribution limit phases out for incomes between $178,000 and $188,000 (joint filers) or $112,000 and $127,000 (single)	None
Federal Financial Aid	Not counted as asset; withdrawals of principal and interest counted as financial aid income	Counted as student's asset
Investments	Broad range of securities and certain other investments	As permitted under state laws
Use for Nonqualifying Expenses	Taxable portion of withdrawal prior to age 59 1/2 also subject to 10% early withdrawal penalty	Funds must be used for benefit of the minor