Personal Finance
Personal Finance
Coverdell Education Savings Account
A Coverdell Education Savings Account (CESA), formerly known as an Education IRA, is a popular way to save for a child's future college expenses. This type of savings plan lets you participate in tax-deferred earnings growth, with complete freedom to manage your investment dollars.
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Plan At A Glance
Maximum Contributions
Lifetime contribution limits of at least $250,0001
Required Income Level
No income restrictions
Age Limit of Beneficiary
No age requirements
Tax Consequences

No federal deductions for contributions; certain states allow residents to deduct contributions from state income tax

Qualified withdrawals are not subject to federal income tax

Qualified withdrawals may not be subject to state income tax (depending on state)

Earnings on non-qualified withdrawals are subject to federal income tax that is paid by account owner

Penalty for Non-Qualified Withdrawals

10% federal penalty on earnings portion

Possible state penalty (depending on state)

Account Control

Account owner decides when withdrawals are made and for what purpose2

Account owner is free to change the designated beneficiary without tax consequences

Investment Control

Must choose among investment portfolios offered by plan3

Contributions may go into a single investment portfolio based on child's age

Limited opportunities to change investment options

    • Qualified withdrawals are not subject to federal income taxes
    • Earnings grow tax-free
    • Complete freedom to choose investments
    • Complete freedom to make changes among investment choices
    • Can transfer from one trustee to another as often as desired
    • No financial aid effect if assets remain property of parent or guardian

1. Contributions must cease once beneficiary reaches 18 year of age.
2. Funds must be distributed once child reaches age 30 unless beneficiary has special needs.

Important Investor Information: Brokerage and insurance products are:

Securities and brokerage services are provided by PNC Investments LLC, a registered broker-dealer and investment adviser and member FINRA, and SIPC. Annuities and other insurance products are offered by PNC Insurance Services LLC, a licensed insurance agency.