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Mutual Funds Videos 165 videos

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Finance: What is a Coverdell Education Savings Account (CESA)/403c? 11 Views


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Description:

What is a Coverdell Education Savings Account (CESA)/403c? College savings plans, such as the 529, operate similarly to IRAs in that they are allowed to grow tax deferred and spent on education. The Coverdell ESA is similar to a 529, but also allows for use with private elementary, junior high and high school tuition costs, not just college.

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Transcript

00:00

Finance a la shmoop what is a Coverdell education savings account? Coverdell...[Man using a red umbrella]

00:09

nope not an umbrella for the farmer in the well what is a Dell anyway? uh no

00:14

different Dell remember farmer in the Dell? all right moving on

00:18

Coverdell was the senator who named this type of tax deferred savings account and

00:23

note it's tax deferred not tax free maybe that is you might put two grand a

00:29

year in this account and you don't pay tax on it this year it just gets

00:33

invested and it grows just like a 401k account and an IRA and a Roth more or

00:39

less but then when you withdraw the money you don't pay tax on it if you use [Cash withdrawn from ATM]

00:44

the dough for school that is for like private school fifth grade books and

00:49

uniforms or that no athletic scholarship in the Ivy League tuition at Princeton [Man walking towards college building and football hits his head]

00:54

Or the iPad app suite from shmoop yeah

00:59

you could spend it on us we'd appreciate it thank you if you don't spend the

01:02

money on education well then you get taxed in the normal way as if it's

01:06

ordinary income there are all kinds of restrictions in this plan like there's a [Restrictions appear]

01:10

max of two grand contributed per kid who benefits from it the dough has to be

01:15

distributed fully by the time the kid is thirty or go to others in the family for

01:20

education and if your family makes too much money like you work too hard you're

01:25

too successful well you might have to cover your own Dell yeah so yeah it's a [Man walking along with a Dell laptop]

01:30

great option for some and an excellent way to attend the school of your dreams

01:34

while temporarily staving off the taxes of your nightmares if you're really lost

01:39

or something to spend it on you know think of your friends here at shmoop...

01:41

we're happy to take your dough

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