COLLEGE SAVINGS 101

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

YEAR 2018 RULESRoth IRA
Federal Income TaxNon-deductible contributions; withdrawn earnings excluded from income after age 59 1/2 – and five years; 10% penalty on early withdrawals waived if used for qualified higher education expenses
Federal Gift Tax TreatmentNo gift involved
Federal Estate Tax TreatmentValue included in the owner's gross estate
Maximum Investment$5,500($6,500 for taxpayers age 50 and over)
Qualified ExpensesSame as 529 plan
Able to Change BeneficiaryNot applicable
Time/Age RestrictionsWithdraw earnings tax-free only after five years and age 59 1/2
Income RestrictionsMust have taxable compensation; contribution limit phases out for incomes between $189,000 and $199,000 (joint filers) or $120,000 and $135,000 (single)
Federal Financial AidNot counted as asset; withdrawals of principal and interest counted as financial aid income
InvestmentsBroad range of securities and certain other investments
Use for Nonqualifying ExpensesTaxable portion of withdrawal prior to age 59 1/2 also subject to 10% early withdrawal penalty
 

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