529 College Savings Plan 529 Prepaid Tuition Plan Custodial Account (UGMA/UTMA) Coverdell Education Savings Account Savings Bonds Roth IRA
Description Tax-advantaged savings account to be used for higher education expenses Tuition units guaranteed to match tuition inflation An irrevocable transfer of assets into a child’s name Tax-advantaged savings account to be used for education expenses Interest may be used tax-free for qualified educational expenses Tax-advantaged savings account, primarily used for retirement
Counts toward financial aid Depends on owner Not applicable Treated as student asset Treated as student asset Treated as owner Asset No
Who can invest Anyone (relative or non-relative) Anyone (relative or non-relative) Anyone (relative or non-relative) Anyone (relative or non-relative) meeting the income limits 1 Parent of student meeting the income limits 6 Owner of account only
Maximum age for contributions No age limit No age limit Age of majority Age 18 Owner must be at least 24 before the bond's issue date (not purchase date). No age limit
Maximum age for withdrawals No age limit No age limit Not Applicable Age 30 No age limit No age limit
Maximum yearly contributions Varies by program, but may be limited to $55,000 per beneficiary ($110,000 for married couples) in the first year of a 5-year period to avoid estate or gift-tax consequences.2 Varies by program, but may be limited to $55,000 per beneficiary ($110,000 for married couples) in the first year of a 5-year period to avoid estate or gift-tax consequenses.2 $12,000 per beneficiary ($24,000 for married couples) to avoid exceeding the federal gift-tax exclusion. $2,000 per year per beneficiary.2 No limit $3,000
Control of funds Account owner maintains control Account owner maintains control Custodian controls investment until minor reaches age of majority at which time it becomes theirs Custodian maintains control Account owner maintains control Account owner maintains control
Ability to change beneficiaries Yes, to another member of the current student's family. Yes, to another member of the current beneficiary’s family. No. Yes, to another member of the current beneficiary’s family. No Yes
Taxation on earnings 3 Earnings grow free from federal income taxes while in the account. Earnings grow free from federal income taxes while in the account.

If beneficiary is
under age 18:

• First $850 of earnings are free from federal income taxes

• Next $850 are taxed at the child’s rate

• Earnings above $1,700 are taxed at the parent’s marginal rate.

18 or older:

• Earnings are taxed at the child’s rate.

 Earnings grow free from federal income taxes while in the account. Interest grows tax-deferred and is tax-free if used for qualified education expenses. Earnings grow free from federal income taxes
Taxation of qualified withdrawals 3 Qualified withdrawals are free from federal income taxes. 4 Qualified withdrawals are free from federal income taxes. 4 Not Applicable
See taxation on earnings above. 		Qualified withdrawals are free from federal income taxes. Not Applicable
See taxation on earnings above. 		Qualified withdrawals are free from penalty and federal taxes
How can funds be used? Post-secondary education expenses including tuition, fees, room and board, books and required supplies and equipment. Varies by program, however, generally may be used on tuition, fees, room and board, books and required supplies and equipment. No restrictions except that funds must be used for the benefit of the named minor. Minor gains control of assets at age of majority. At any accredited colleges and universities in the US, funds can be used for tuition, fees, room and board, books and required supplies and equipment.

At public, private or religious primary or secondary schools, funds can be used for education expenses, including tuition and fees, room and board, uniforms, transportation, after school programs and computer technology equipment. 		Tuition and mandatory fees for post-secondary education and contributions to 529s and ESAs. Post-secondary education expenses including tuition, fees, room and board, books and required supplies and equipment.
Where can funds be used? Any accredited college or university in the U.S. (includes graduate schools, community colleges and accredited vocational and technical schools). Varies by program, however, generally may be used at the accredited college or university in the U.S. (includes graduate schools, community colleges and accredited vocational and technical schools) for which the units were purchased. No restrictions. Child controls use of funds (doesn’t have to be used for higher education). Any accredited college or university in the U.S. (includes graduate schools, community colleges and accredited vocational and technical schools).
Education IRA assets may be used for public, private or religious primary or secondary education expenses (including tuition and fees, room and board, uniforms, transportation, after school programs and computer technology equipment). 		Any accredited college or university in the U.S. (includes graduate schools, community colleges and accredited vocational and technical schools).
Investment options Professionally managed structured portfolios. Investments are determined by the state. No restrictions No restrictions U.S. Savings Bonds (Series I & EE)
Penalties for non-qualified withdrawals 10% surtax withheld on earnings, plus regular income tax at account owner’s tax rate.5 10% surtax withheld on earnings, plus regular income tax at account owner’s tax rate.5 Not Applicable 10% penalty withheld on earnings, plus regular income tax at custodian’s tax rate. Interest earned is taxed as income. 10% penalty, plus regular income taxes at owners's tax rate
Notes

1 Income limit phase-out for individual tax filers is $95,000-$110,000. For married taxpayers it is $190,000-$220,000.

2 Contributions between $11,000 and $55,000 made in one year can be prorated over a 5-year period without incurring gift taxes or reducing your unified estate and gift tax credit. If you contribute less than the $55,000 maximum, additional contributions can be made without incurring gift taxes, up to a prorated level of $12,000 per year. Gift taxation may result if a contribution exceeds the available annual gift tax exclusion amount remaining for a given beneficiary in the year of contribution.

3 State tax treatment varies by state.

4 Please note that the federal tax exemption is due to expire on December 31, 2010, unless the law providing for the federal exemption is extended.

5 The earnings portion of non-qualified withdrawals is subject to a federally required 10% surtax and will be taxed at the account owner’s income

6 Income limit phase-out for individual tax filers is $55,750-$70,750. For married taxpayers filing joint it is $83,650-$113,650.