Best place to start Coverdell ESA account?

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69chevy
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Joined: Fri Nov 01, 2013 12:58 pm
Location: Kentucky

Best place to start Coverdell ESA account?

Post by 69chevy » Tue Nov 05, 2013 2:16 pm

Now that I believe I have my Rollover IRA and 401k worked out I want to start focusing on my son's education fund. The state I live in does not have any additional tax benefits for a 529 or ESA. I'm familiar with the differences and don't see me putting in more then $2,000 each year - at least not at this time. If some how I come into excess money I can easily start a 529.

That said I'm looking for some recommendations as to where to open a new Coverdell ESA account for my newborn son? Thanks in advance!

letsgobobby
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Re: Best place to start Coverdell ESA account?

Post by letsgobobby » Tue Nov 05, 2013 3:03 pm

Schwab

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Hub
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Re: Best place to start Coverdell ESA account?

Post by Hub » Wed Nov 06, 2013 7:53 am

letsgobobby wrote:Schwab
This is correct. Excellent free index fund and ETF options. No account fees. I have mine there.

123
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Re: Best place to start Coverdell ESA account?

Post by 123 » Wed Nov 06, 2013 7:04 pm

Chalk up another vote for an ESA at Schwab. I started one maybe 12 years ago elsewhere and then moved it to Schwab. I am now in the phase of doing withdrawals for college expenses. The only limitation at present is that I have to do a paper form for a withdrawal. (I think the paper form is an advantage because it lets you think about tax issues. The ESA is essentially a special purpose IRA in the way taxation of withdrawls works.) However it's simple and Schwab releases funds within a week. Depending on tax planning and other issues many people might only do one or two withdrawals a year so, as a person who's been "through the loop" with a Schwab ESA, I have to heartily recommend them.
The closest helping hand is at the end of your own arm.

Topic Author
69chevy
Posts: 66
Joined: Fri Nov 01, 2013 12:58 pm
Location: Kentucky

Re: Best place to start Coverdell ESA account?

Post by 69chevy » Thu Nov 07, 2013 2:29 pm

Thanks guys, looks like I was looking in all the wrong areas (Scottrade and Capital One 360 sharebuilder) and instead need to check out Schwab. :beer

Topic Author
69chevy
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Location: Kentucky

Re: Best place to start Coverdell ESA account?

Post by 69chevy » Fri Jan 03, 2014 5:52 pm

I know this is a few months old but between the holidays and waiting for Schwab to receive the paper application and process it I finally got the account up and running today. I'm going to add my bank details so I can get it funded but I will say this. I've not spent more then 2 minutes on the web site so I can't give a very detailed review but one thing that REALLY bothers me, even more so being a financial institute is that fact their password requirements are HORRIBLE.

I think most people know the longer and more complex the password the harder it is to crack/guess, but as a computer guy I know this to be more so true. The fact Schwab limits passwords to being only 6-8 characters long with NO symbols ($,@,!,*, etc) is really really antiquated.

In the very unlikely event that someone at Schwab reads this, I'd really hope they would pass this on to someone in charge of said decisions and get their system updated. Most forums (this one included) allows passwords more complex this Schwab themselves do. It's time to get with the ages. Better security and maybe even two-factor authentication would be a great needed upgrade.

letsgobobby
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Re: Best place to start Coverdell ESA account?

Post by letsgobobby » Fri Jan 03, 2014 5:57 pm

My Schwab account uses a password which is 10 characters long, including numbers and caps.

Topic Author
69chevy
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Joined: Fri Nov 01, 2013 12:58 pm
Location: Kentucky

Re: Best place to start Coverdell ESA account?

Post by 69chevy » Fri Jan 03, 2014 6:06 pm

letsgobobby wrote:My Schwab account uses a password which is 10 characters long, including numbers and caps.
Please do tell your secret as to how you managed to use 10 characters?

Here is my change password screen, while the limitations are not displayed on this page as they where on the initial login after receiving my temp password from the operator, you can clearly see that the password field stops at 8 characters. Any further characters typed are ignored...

Image

EDIT: The Schwab help page shows the limitations of their passwords.

Image

I'm now even more interested in hearing how you manged to bypass their restrictions?

Topic Author
69chevy
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Joined: Fri Nov 01, 2013 12:58 pm
Location: Kentucky

Re: Best place to start Coverdell ESA account?

Post by 69chevy » Fri Jan 03, 2014 6:16 pm

WOW!!!

When I was on the phone today with the operator at Schwab he did say capitalization is not important and I thought he was referring to just the username. After wondering more about how letsgobobby thinks he is able to bypass Schwabs restrictions and have a 10 character password (still waiting to see how that's done) I tried logging into my account using my user ID and password, but this time using all lower case in my password.

Sadly, it let me in. Caps is not recognized in Schwabs horrible online system. Just to be sure this wasn't some kind of cookie issue. I tried using a different browser in "private" mode and yes, typing the capital or no capital letters the system lets me in. This is pretty serious, as your (anyone using Schwab) passwords is hardly "secure".

letsgobobby
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Re: Best place to start Coverdell ESA account?

Post by letsgobobby » Fri Jan 03, 2014 6:25 pm

ok, my turn to say WOW now.

I tried typing my password without the caps. It works. Wow.

I tried typing just the first 8 characters of my password. It works. Double wow.

I tried typing just the first 8 characters of my password with no caps. It works. Triple wow.

I might need to transfer my account to Vanguard. That's really frightening.

Laura
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Re: Best place to start Coverdell ESA account?

Post by Laura » Sat Jan 04, 2014 9:32 am

Why not use Vanguard for the Coverdell? I did this and just used one target retirement fund inside the account. Obviously isn't doesn't become more conservative fast enough so every few years I just transferred to a more conservative target retirement fund. Vanguard did all the work so I could just focus on adding money as I had it. Easy and low cost. Also, I was confident that is something happened to me my spouse could manage this.

Laura
The views presented are my own and not necessarily those of the Department of State or the U.S. Government.

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Bruce
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Re: Best place to start Coverdell ESA account?

Post by Bruce » Sat Jan 04, 2014 9:50 am

Not sure Vanguard will let you open a new Coverdell college savings account anymore,

I also have these accounts for my kids at Vanguard, but Vanguard now appears to be offering only the 529 account option for new college savings accounts, I think since late 2010 when it looked like the annual Coverdell college savings account contribution limit was likely going down to only $500. Fortunately that law was fixed at the last second, and the contribution level changed back to the previous $2000 level.

The $2000 annual contribution limit is a definite downside to using a Coverdell for saving for college today compared to the higher annual contribution limits allowed in a 529, especially when just one required text book for my college freshman commonly runs over $200.

Vanguard does offer some good 529 options though as well.

regards,
Bruce | | Winner of the 2017 Bogleheads Contest | | "Simplicity is the master key to financial success."

Laura
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Re: Best place to start Coverdell ESA account?

Post by Laura » Sat Jan 04, 2014 10:13 am

Bruce,

You are right. Sorry for the false advertising. I hadn't looked at them in a long time. I opened ours many years ago then began funding a 529 but left the money in the Coverdell and never looked at Vanguard's website on the topic. Off to another company then.

Laura
The views presented are my own and not necessarily those of the Department of State or the U.S. Government.

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