Coverdell Options after fees went up

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Topic Author
modulusmath
Posts: 14
Joined: Sun Jan 28, 2018 3:00 pm

Coverdell Options after fees went up

Post by modulusmath » Sat Mar 30, 2019 10:54 am

Hi All

As it stands I have a Coverdell for my son - opened a few yrs ago. Since it's self directed the firm I am currently with mandates it be w/them. The fees have gone up considerably - $70/yr which I am not fond of and too high as a percentage.

I got some of them waived by being a bit of a squeaky wheel but I'm thinking about doing something (hopefully clever and legal) going forward like have my son's mother's open a new Roth IRA and use that. She'll be 59.5 by the time he's in college anyway. ( We realize that that conflicts w/her ability to put money in a Roth).

Really just looking for some workarounds - Is there any sort of method to do this seamlessly without any tax consequences?

Thanks in advance

ccieemeritus
Posts: 628
Joined: Thu Mar 06, 2014 10:43 pm

Re: Coverdell Options after fees went up

Post by ccieemeritus » Sat Mar 30, 2019 11:01 am

I think it is possible to convert a Coverdell to a 529. That may give you a lower fee option.

Topic Author
modulusmath
Posts: 14
Joined: Sun Jan 28, 2018 3:00 pm

Re: Coverdell Options after fees went up

Post by modulusmath » Sat Mar 30, 2019 7:53 pm

Thanks for the reply. You are right. I should have stated I do want to keep the option to self direct. Thank you!

MnD
Posts: 4339
Joined: Mon Jan 14, 2008 12:41 pm

Re: Coverdell Options after fees went up

Post by MnD » Sat Mar 30, 2019 8:03 pm

modulusmath wrote:
Sat Mar 30, 2019 10:54 am
Since it's self directed the firm I am currently with mandates it be w/them.
I'm confused by this statement. Is the "firm you are currently with" your employer and they mandate any ESA must be through them?
I had our self-directed ESA at Schwab and don't recall any fees. What sort of employer restricts your ESA to them and then charges $70/yr? :annoyed
Could your sons Mom open an ESA at a no-fee place?
https://www.schwab.com/public/schwab/in ... gs_account

Topic Author
modulusmath
Posts: 14
Joined: Sun Jan 28, 2018 3:00 pm

Re: Coverdell Options after fees went up

Post by modulusmath » Sun Mar 31, 2019 9:01 am

MnD wrote:
Sat Mar 30, 2019 8:03 pm
modulusmath wrote:
Sat Mar 30, 2019 10:54 am
Since it's self directed the firm I am currently with mandates it be w/them.
I'm confused by this statement. Is the "firm you are currently with" your employer and they mandate any ESA must be through them?
I had our self-directed ESA at Schwab and don't recall any fees. What sort of employer restricts your ESA to them and then charges $70/yr? :annoyed
Could your sons Mom open an ESA at a no-fee place?
https://www.schwab.com/public/schwab/in ... gs_account
Sorry - Yes - I currently work full for a 'big investment bank'. And yes it's $70/yr and I must go w/THEM if I want to self direct. I did put up a stink and got some relief but it's unlikely they will bend to my will forever/always :happy .

>>Could your sons Mom open an ESA at a no-fee place?
>>https://www.schwab.com/public/schwab/in ... gs_account

Great idea. Technically the big bank would not 'allow' that since she's on my benefits.
However I think if she got a new job w/her own benefits **maybe**.

You can start to see the needle I am trying to thread.

Thanks for your excellent suggestion!

tindel
Posts: 149
Joined: Sun Nov 12, 2017 10:06 am

Re: Coverdell Options after fees went up

Post by tindel » Sun Mar 31, 2019 9:26 am

My daughter's ESA is through Schwab as well - no fees other than transaction fees and expense ratios. I think you can invest in any ESA so long as you don't go over the maximum for the SSN for the year. (I think it's $2k for 2018 and 2019) You could even contribute $400 to 5 different ESA's if you'd like.

I'm not sure why you're forced to invest with your employer's ESA - although I am aware that there are strange investment rules within investment companies due to ethical reasons, but there's usually at least a few options as far as I'm aware. Perhaps your options are limited due to this?

ESA's have been the red-headed step child of the college savings plans. So it may be hard to find another place to invest in a ESA. I don't believe vanguard will open a new ESA anymore. I know etrade had an esa, but they like to change their fee free list regularly without notice, so I wouldn't recommend them - ask me how I know.

There's always the option to leave a company too over something like this. At one point I was looking for a new job when I couldn't make headway with my company to get better 401k options. Ended up finding a new job with significantly better 401k, benefits, and pay, but significantly worse coworkers and culture. You can't win! Ha!

Topic Author
modulusmath
Posts: 14
Joined: Sun Jan 28, 2018 3:00 pm

Re: Coverdell Options after fees went up

Post by modulusmath » Sun Mar 31, 2019 8:04 pm

tindel wrote:
Sun Mar 31, 2019 9:26 am
My daughter's ESA is through Schwab as well - no fees other than transaction fees and expense ratios. I think you can invest in any ESA so long as you don't go over the maximum for the SSN for the year. (I think it's $2k for 2018 and 2019) You could even contribute $400 to 5 different ESA's if you'd like.

I'm not sure why you're forced to invest with your employer's ESA - although I am aware that there are strange investment rules within investment companies due to ethical reasons, but there's usually at least a few options as far as I'm aware. Perhaps your options are limited due to this?

ESA's have been the red-headed step child of the college savings plans. So it may be hard to find another place to invest in a ESA. I don't believe vanguard will open a new ESA anymore. I know etrade had an esa, but they like to change their fee free list regularly without notice, so I wouldn't recommend them - ask me how I know.

There's always the option to leave a company too over something like this. At one point I was looking for a new job when I couldn't make headway with my company to get better 401k options. Ended up finding a new job with significantly better 401k, benefits, and pay, but significantly worse coworkers and culture. You can't win! Ha!
Agreed. I don't plan to be there forever. And honestly not too much longer :). In the meantime I do appreciate the info!

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