Coverdell ESA at Charles Schwab
If you’re looking for a way to lay aside some money for a young family member or other student, the Coverdell Education Savings Account is one option worth considering. Charles Schwab offers this account with some nice benefits. Here are the details:
Opening ESA at Charles Schwab
To open the Coverdell Education Savings Account, you’ll need
to visit the appropriate page on the Charles Schwab website. Hit "Open new account" button. Once you’re there, on the left you’ll see a column of options. Scroll down to the section for “Education Savings.” Expand this group by clicking on the plus sign. Once expanded, you’ll see some account options, one of which is the Coverdell account.
Once you select the Coverdell account, you’ll be taken to the account opening page. For some reason, Charles Schwab won’t open the account online. So you’ll get three options. You can download the required forms, have the broker e-mail them to you, or receive them via the U.S. postal service. With whatever option you go with, you’ll have to fill out the forms and send them back before the broker will actually open the account for you.
Details of the Coverdell Account
The great benefit of the Coverdell account is that funds can be used at any level of education, not just higher education. The downside is that contributions aren’t tax deductible. The Coverdell’s tax structure is like a Roth IRA, which means earnings grow tax-free, and withdrawals aren’t taxed.
The U.S. government permits up to $2,000 per year in contributions to a Coverdell account. One caveat needs to be noted here: This maximum goes down for contributors whose modified adjusted gross income (MAGI) exceeds $95,000–$110,000 (for single filers) or $190,000–$220,000 (for married filing jointly). Above those highest levels ($110,000 or $220,000), contributions aren’t permitted at all.
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Charles Schwab Fees for the Coverdell Account
Like other account types at Charles Schwab, the Coverdell Education Savings Account is a no-fee
account. This means no annual, maintenance, low-balance, inactivity, or other annoying charges.
Furthermore, Charles Schwab charges nothing for stock and ETF trades. Option trades have no base
charge but do carry a 65-cent per-contract fee.
Besides stocks, ETFs, and options, Charles Schwab customers also have access to mutual funds, forex,
futures, and bonds. The software to trade any of the broker’s investments comes with no fees or
minimums of any kind.
Other Education Accounts at Charles Schwab
If the Coverdell Education Savings Account doesn’t meet your demands, there are some other education
and minor accounts at Charles Schwab that may.
A 529 Plan is sponsored by the State of Nebraska; although residents of other states may open
Charles Schwab’s 529 Plan. Like other 529 plans, it comes with tax-free growth and tax-free withdrawals. Contributions aren’t tax deductible at the federal level, although they are tax deductible on a Nebraska tax return.
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