Coverdell Savings Account

Invest in a child's future through a tax-deferred plan.*

A Coverdell Savings Account is an education savings plan started and managed by a parent, grandparent or other interested party for the benefit of a child. Similar to a Roth IRA, money placed in a Coverdell can grow tax-deferred until withdrawn, and no taxes will be owed on earnings as long as they are used for primary, secondary and/or higher education expenses. Allowed uses include:

Tuition
Books
Supplies
Room & Board
Computer Equipment
Internet Services
Uniforms

The Coverdell Savings Account has a few rules to be aware of:

Contributions are limited to $2,000 per year from all sources
Contributions only allowed through age 18, unless special needs
Money must be used (or transferred) before child turns 30
You may change beneficiary to another family member once a year
At age 18, management of account may be transferred to child
Contributor's modified Adjusted Gross Income (AGI) must be $110,000 or less for single filers ($220,000 joint) - though contribution limits phase out at $95,000 for single filers and $190,000 for joint filers. Be sure you understand all the rules before opening a Coverdell.

*AARP Financial Inc. does not provide tax advice. Please consult a tax advisor for information pertaining to your particular situation.

The Financial Advisors are investment adviser representatives of AARP Financial Inc., an investment adviser.

While AARP endorses the services provided by AARP Financial Inc., AARP does not offer financial products or services itself and cannot recommend that you or any specific individual should purchase any particular product or service. AARP Financial Inc. is an investment adviser and a subsidiary of AARP.