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Financial Planning / Tax Strategies
|Subject: Combining Education IRA and State Savings Plan||Date: 6/9/2000 11:19 AM|
|Author: wsterry||Number: 36426 of 125704|
I haven't seen much on this concept, so maybe it's obviously too dumb (and I just am missing something), so I'd like some feedback from this august crowd.
If I contribute $500 per year to my daughters education IRA and also make a contribution to a state college savings plan, I'm required to pay a 6% excise tax on the eductional IRA contribution. What I don't clearly understand is whether the education IRA is actually valid. In other words if I put the 500/year into the accounts and pay the et of 30/year for the excess, can I use the money in the education IRAs ten years from now tax free for education expenses?
If so this looks like a reasonable deal. If we assume that I can make 10-11%/year on the investments in the IRA which will be tax free and compounds. And pay the excise tax each year with outside-the-IRA funds (and the fee doesn't compound), what's the downside?
I must be missing something or I'd expect more interest in this approach.
thanks for any advise,
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