Coverdell Education Savings Account

A Coverdell Education Savings Account (ESA) is an ideal account to help parents save toward expenses for their child's higher education. While funds deposited are not tax deductible, funds can be withdrawn tax-free and penalty free for qualified reasons.

  • Benefits/Good To Know
  • Application Process
  • Tools
  • FAQs
 

Benefits

  • Dividends are paid monthly
  • Contributions up to $2,000 annually can be made until the child's 18th birthday (income limitations may apply)
  • Ability to make contributions conveniently with payroll deductions
  • Anyone can contribute to the account
  • Funds you contribute and earn are not tax deductible
  • Ability to make contributions conveniently with payroll deductions
  • Safe and secure investment vehicle
 
 

Good To Know

  • JSC FCU does not accept wire transfers to IRA accounts
  • Available in a variable savings account with a minimum deposit of $25
  • A minimum opening deposit of $500 for an IRA Share Certificate
  • Funds you contribute and earn are not tax deductible
  • Funds you contribute and earn can be withdrawn tax-free and penalty tax-free as long as the funds are used for higher education expenses, such as the following:
  • Tuition, certain room & boarding expenses, books, computer equipment, internet access, etc.
  • While there are no specific withdrawal requirements, the funds must be used for the child's higher education expenses before age 30 (except for children with special needs)
  • Withdrawals not used for higher education expenses are subject to normal income tax plus a 10% penalty(consult your tax advisor concerning your situation)

Application Process

Complete the IRA application at any branch location or on the IRA Center

Beneficiary (the child that you are opening the Coverdell for)

  • You will need each the beneficiary (child’s):
    • Name
    • Address
    • Date of birth
    • Social Security Number

Depositor’s Information (Person who initially sets up the Coverdell ESA)

You will need:

    • Name
    • Address
    • Date of birth
    • Social Security Number

Responsible Individual Information (Parent or Legal Guardian of Designated Beneficiary) and is the only person that can withdrawal funds from the Coverdell.

You will need:

    • Name
    • Address
    • Date of birth
    • Social Security Number

Fund the Account

    • Minimum to open an IRA variable is: $25.00
    • Minimum to open a IRA certificate is $500.00

Withdrawal forms must be completed and signed by the Responsible Individual.

Tools

Planning Tools

A Coverdell Education Savings Account (ESA) is an ideal account to help parents save toward expenses for their child's higher education. Contributions to an ESA are never tax-deductible, the earnings accumulated are tax-deferred. Any distributions used to pay for qualified education expenses are tax-free.

The ESA contribution limit is $2000 per child per tax year. 

Beneficiary Planners

Are you an IRA beneficiary? If so, don't miss out on the significant tax-deferral options available to you. These tools will help you identify your distribution options, project future payments, and calculate required beneficiary distributions.

  • Beneficiary Options Calculator
    Review the options available for all types of beneficiaries to determine which will best assist you in maximizing tax deferrals and minimizing required minimum distributions (RMDs).
  • Payout Projections Calculator
    The Payout Projections Calculator is designed to assist beneficiaries of deceased IRA owners in projecting future required distributions from the decedent's IRA.
  • Beneficiary Payout Calculator
    The Beneficiary Payout Calculator is designed to assist beneficiaries of deceased IRA owners in calculating required distributions from the decedent's IRA.
  • College Savings Planner
    Sending your kids to college? This tool will help you estimate how much savings you need to accumulate to meet your financial objectives for college expenses.

Retirement Savings Planner
It doesn't matter whether your retirement is 3 years away or 40 years away; it's never too soon or too late to begin planning. This retirement savings tool willo help you estimate how much savings you will need to accumulate in order to meet your retirement objectives.

FAQs

When are dividends paid to members?

All dividends are paid monthly except on Regular Shares (S1), Special/Additional Savings (S2), and Christmas Club (S3) which are paid Quarterly. Dividends are paid on the first day of the month for amounts accrued during the previous month.

When are dividend checks mailed to members?
Dividend checks are mailed on the first business day of each month for monthly paid accounts, and the first business day of the quarter for quarterly paid accounts.
What is the minimum balance requirement in my Savings Account to earn any interest?
The minimum balance to open a Savings Account with JSC is $5.00. Dividends are calculated by the daily balance method which applies a daily periodic rate to the balance in the account. For this account, dividends will be compounded and paid quarterly.

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