What are the basics on ESAs, educational IRAs, 529s, and UTMAs?
The Educational IRA is the same thing as an ESA (Educational Savings Account). The ESA is basically buying a mutual fund and stamping it ESA. You must make less than $200,000 annually (married filing jointly). You can contribute up to $2,000 annually per child. You can have several ESAs, but the total of them can only be $2,000 annually per child. That money will grow completely tax-free when used for higher education. You can move them around to different mutual funds as well. Like ESAs, 529 plans all grow tax-free, but you have significantly less control than with an ESA. There are three kinds of 529 plans. The first is pre-paid college tuition. NEVER do this. The rate of return is based on the inflation rate, which is currently around 7 percent. This is a terrible rate of return for a long-term investment. The other types of 529s allow you to invest up to $10,000 annually. With the Life-Phase 529, you give the money to a 529 administrating company, and they invest it based upon your
