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Education IRAs

If you have children or grandchildren under the age of 18, an Education IRA is a great way to give them money for their education. Starting with 2002, you can contribute up to $2000 per beneficiary per year. If several folks are contributing to an Education IRA for a beneficiary, the total contributions by everyone can't exceed $2000 per beneficiary per year either.

Starting in 2002, the money can be used for educational expenses besides college. See the IRS publication 970 for more details.

If the beneficiary doesn't use all the money, the money can be rolled into an education IRA for a family member who isn't yet 30. Otherwise, it has to be withdrawn by the 30 days after the beneficiary reaches age 30(or die, whichever is sooner).

According to the IRA Growth calculator, if you put $2000/year in an Education IRA rather than a taxable account, both earning 10%(over the long term, mutual funds have averaged 11.4%) starting when the child is born, they will have $89198.35 for college rather than $64070.48.

Relating to education...I saw this article on when to consolidate your student loans and thought it was interesting. Basically you want to decide in June because the fixed rate changes in July based on the May auction of 91 day T-bills. They also discuss the pros and cons of consolidating and some other things to consider.

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