IRA Helps Save For College

Parents of a newborn can expect to spend about $100,000 for a four-year college education, according to financial experts. A private university can cost more than twice that.

But there are plenty of ways to save for higher education, according to Consumer Reports.

Education individual retirement accounts are among the savings options for families. As of Jan. 1, parents can set aside more money each year -- up to $2,000 per child instead of the previous limit of $500.

Marlys Harris works at Consumer Reports. She's been reporting on personal finance for 23 years.

Harris said that the educational IRAs, or what's called Coverdell accounts, work like regular IRAs.

"The Coverdell accounts are personal savings plans where the money you set aside grows tax-free. Instead of a retirement nest egg, the money is earmarked for education," Harris said.

To put away the maximum of $2,000 a year, a married couple filing jointly can have an adjusted gross income of no more than $190,000. Single taxpayers must have an adjusted gross income of no more than $95,000.

"For the first time, employers can contribute to a Coverdell account. So, it's worth asking if your company is offering this benefit," Harris said.

Harris said that since the Coverdell account is in a child's name, the money is considered an asset, so it may affect applications for financial aid.

More Information:

• www.savingforcollege.com