educational iras

[Guest jennifer jones]

i was wondering if someone could tell me why the banks are trying to talk me out of educational iras. I opened one last year and when i went to contribute today, i had 3 people tell me to be careful. I would truly appreciate any and all information, articles and or criticism of this ira as i am trying to do the best for my son as possible. My son just turned two and i am really worried about college expense. Thank you in advance for any wisdom or plain ole' advice. have a nice day...jennifer

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hoottater

[Guest John R Grossmann]

One problem with the education Roth is that you just can't salt away enough $$. In your case, for a two year old, with the max $ each year your 16 years of investing may end up covering 1 or 1.5 years of college.

See other comments on prepaid plans and educ IRA at this site. The edu-Roth, Fidelity plan, and most state tuition prepays all have drawbacks and limitations. You may want to keep things simple and directly buy stocks (growth with low or no dividend) or mutual funds (tax managed or index funds) which will appreciate but have little or no tax impact until you choose to sell them to pay college bills. Investing outside of a "plan" gives you a lot of freedom because you have no limit on $$ to dedicate to education, you can keep control of the assets, and you have a wide (as opposed to restricted) choice in investment vehicles.

I have a couple of friends that bought small blocks of tech companies (MSFT, DELL, etc.) with the intention of funding their kids college. Eight years later all of the college costs are covered... and paying the 20% long term gain doesn't seem so ugly.

You are to be congratulated for planning for your kids. There are lots of choices. Obviously, you can do the Educ IRA and supplement it with other options. Good Luck.