College Savings: Coverdell vs. 529

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Topic Author
tonsofthorns
Posts: 31
Joined: Sat Feb 11, 2012 1:22 pm

College Savings: Coverdell vs. 529

Post by tonsofthorns »

Need help with college savings:

My 7 yr old has a Coverdell ESA at Vanguard which we max out each year.
I like the Coverdell because of the flexibility of using it for primary school, which we have not used for this purpose or do we plan on. But this account may change in 2013 if not extended.

I also have a two year old that we are starting a college plan for.
Our options at vanguard are only in the form of a 529. Having all funds at vanguard does make for easier use.
If I were to go with a Coverdell for my son I could possibly go with TDAmeritrade (Commission Free Vanguard ETF's) or Schwab (Commission Free Schwab ETF's or Funds).

My initial thought is to open a TDAmeritrade account for my son and put in $2K for 2011 and $2K for 2012. And to catch him up with his sister, I would open up a 529 at vanguard and fund it with $2K. This is obliviously not very simple, but if rules change I would be able to role the TD account into his 529.

Questions:
What are other Bogleheads doing with College Savings account nowadays: Coverdell or 529?
What experiences do others have at TDAmeritrade dealing with Coverdell Accounts and their Commission Free ETF's?

Thanks for your help!
MariaT
Posts: 176
Joined: Mon Feb 19, 2007 9:34 pm

Re: College Savings: Coverdell vs. 529

Post by MariaT »

When we planned for college savings for our daughter we chose the 529 route because it allowed for higher limit contributions. We chose Vanguard since most of our assets are with them and it made that decision easy, though there are other excellent 529s outside of Vanguard with lower ER. When we setup the 529 we opted for the Age-Based Portfolio for its simplicity and auto-pilot stance. I know there are others who do not like this approach and wants more of a hands on control and this, too, have work for them. I guess the bottom line is do what works best for you.

I do not have any thoughts on Coverdell or experience with TDAmeritrade Coverdell Acct (though I have a brokerage acct with them) and perhaps someone can chime in.

Good luck.

Warm regards,
Maria
User avatar
dianna
Posts: 221
Joined: Wed May 04, 2011 12:31 pm

Re: College Savings: Coverdell vs. 529

Post by dianna »

[quote="tonsofthorns"]What are other Bogleheads doing with College Savings account nowadays: Coverdell or 529?
What experiences do others have at TDAmeritrade dealing with Coverdell Accounts and their Commission Free ETF's?[/quote]

We do both for our child: A Coverdell which is funded the max of $2000/year (because as you suggested, it can be used for costs prior to college) and a 529. Using a Coverdell ESA only seems limiting if one can contribute more than $2000/yr given the costs of education down the road, thus the 529.
Topic Author
tonsofthorns
Posts: 31
Joined: Sat Feb 11, 2012 1:22 pm

Re: College Savings: Coverdell vs. 529

Post by tonsofthorns »

Thank you for taking the time to post. Good info.

Can anyone tell me about their experiences with TDAmeritrate, especially with Coverdell ESA's?
xerty24
Posts: 4827
Joined: Tue May 15, 2007 3:43 pm

Re: College Savings: Coverdell vs. 529

Post by xerty24 »

tonsofthorns wrote:Can anyone tell me about their experiences with TDAmeritrate, especially with Coverdell ESA's?
They're fine. Trades for stock are $10, but if you trade once a year that's the only fee you'll pay. Might be able to get a NTF mutual fund too. Customer support is good. Contributions can't be done online however for ESAs - send a check or transfer from another TDA account via a paper form.
No excuses, no regrets.
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