An educational IRA allows individuals to contribute up to $2,000 in after-tax dollars to an educational IRA for each student who is under the age of 18 years of age. The money is allowed to grow tax deferred and the growth may be withdrawn tax free, as long as the money is used for educational purposes. If all of the funds have not been used for educational purposes by the time the student reaches 30 years of age, the account must be rolled over to another family member who is under 30 years of age or distributed to the original student and is subject to a 10% penalty tax as well as ordinary income taxes.

529 Plans

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