| 529 Saving Plans | Coverdell ESA | UGMA/UTMA | Roth RIAs | Series I Bonds | |
| Tax Benefits | Earnings: *FEDERAL: Tax-free *STATE: Tax-free Withdrawals: *FEDERAL: Tax-free *STATE: Tax-free if one invests in one’s state 529 plan. A few states tax withdrawals if one invests in an out-of-state 529 plan |
Earnings: *FEDERAL: Tax-free *STATE: Tax-free Withdrawals: *FEDERAL: Tax-free *STATE: Tax-free |
Beneficiary under 18: * First $850 of earning free from federal taxes, next $850 taxed at the Child’s rate * Earnings above $1,700 are taxed at the parents’ rate Beneficiary over 18: * First $850 of earning free from federal taxes, the rest is taxed at child’s rate |
Contributions: * Non-deductible * withdrawal tax-free Earnings: * no early withdrawal penalty * Withdrawals subject to account owners ordinary tax rate |
Earnings: *FEDERAL: Tax-free *STATE: Tax-free *LOCAL: Tax-free |
| Is the value of the account excluded from the owner’s taxable estate? | Yes | Yes | No | Yes | No |
| Maximum Investment | Varies by state. Some states allow new contributions until balance is as high as $310,000 | Up to $2,000 per beneficiary per year | No Limit | $4,000 per year ($4,500 for taxpayers age 50 and over); gradually increasing to $5,000 by 2008 | Up to $30,000 per year |
| Minimum Investment | Depends on plan, usually from $25/ month to $50/ month, with some managers requiring automatic contributions from bank a/c or payroll | Varies by provider/ investment | Varies by provider/ investment | Varies by provider/ investment | $50 per year |
| Qualified Higher Education Expenses | Savings plans: Tuition, room & board, books, supplies, equipment and expenses for special needs services Prepaid plans: Tuition & fees only |
Tuition, room & board, books, supplies, & equipment. Elementary & secondary education expenses also qualify | Any Expense | Tuition, room & board, books, supplies, & equipment and expenses for special needs services | Tuition & fees only |
| Financial Aid Treatment | Parent’s Assets | Parent’s Assets | Beneficiary’s Assets | Not counted as asset; withdrawals of principal and interest counted as financial aid income | Parent’s assets if education is for child. Student’s assets if education expenses are for oneself. |
| Income Restriction | None | Yes. Parents filing single (filing jointly) with income above $110,000 ($220,000) cannot invest. | None | Yes, Parents (filing jointly) with income above $160,000 cannot invest. | No restriction on purchases. $91,850 – $121,850 for joint returns |
| Flexibility | Earnings on non-qualified withdrawals may be subject to federal income tax at the parents’ rate, plus a 10% federal penalty tax, plus any state and local income taxes where applicable. | Earnings on non-qualified withdrawals may be subject to federal income tax at the parents’ rate, plus a 10% federal penalty tax, plus any state and local income taxes where applicable. | Money can be withdrawn when becomes of legal age. Money can be used for any purpose. | Same as 529 plan | Can be redeemed after 6 months. A 3 month earnings penalty applies |
| Control of Account | Account holder, who could be a parent, grandparent, other relative, friend or even a business entity in some states. | Parent or other responsible individual | Beneficiary takes hold of account once custodianship ends which is usually 18 or 21 varying by state | Account owner | Bondholder |
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