Unlike traditional and Roth IRAís, Education IRAís are not tools for retirement savings. They are designed solely to help pay higher education expenses.
Because the purpose of an Education IRA is so different from traditional and Roth IRAís, the advantages are also unique. Earnings on the funds in an Education IRA will be tax free if they are used to pay for higher education expenses before the designated beneficiary reaches age 30. The earnings are taxable to the designated beneficiary (not the responsible individual or contributor) if they are withdrawn for any other purpose.
An Education IRA encourages a regular savings program for a childís education. Persons, such as grandparents, can fund this type savings and in many instances, funds can be moved from one family memberís account to anotherís. Contact the Credit Union for more information.
Again, Education IRA dividends are compounded daily and paid quarterly. Monies withdrawn before quarter end do not receive a dividend on the withdrawn portion.